union budget 2021-22

Union Budget 2021-22

Analysis of expenditure by Ministries

March 2021

DISCLAIMER: This document is being furnished to you for your information. You may choose to reproduce or redistribute this

report for non-commercial purposes in part or in full to any other person with due acknowledgement of PRS Legislative Research

(“PRS”). The opinions expressed herein are entirely those of the author(s). PRS makes every effort to use reliable and comprehensive

information, but PRS does not represent that the contents of the report are accurate or complete. PRS is an independent, not-for-profit

group. This document has been prepared without regard to the objectives or opinions of those who may receive it.

Contributors:

Mandira Kala

Prachee Mishra

Aditya Kumar Manish Kanadje

Prachi Kaur

Saket Surya

Shruti Gupta

Suyash Tiwari

PRS Legislative Research

Institute for Policy Research Studies 3rd Floor, Gandharva Mahavidyalaya 212, Deen Dayal Upadhyaya Marg New Delhi – 110 002

Tel: (011) 4343-4035, 2323-4801

www.prsindia.org

March, 2021

Table of Contents

Overview ........................................................................................................................................... 1

Budget at a glance ............................................................................................................................. 3

Receipts Highlights ......................................................................................................................................................................... 8

Expenditure Highlights ............................................................................................................................................................ .... 10

Defence ............................................................................................................................................15

Food and Public Distribution ..............................................................................................................23

Railways ...........................................................................................................................................36

Home Affairs .....................................................................................................................................46

Rural Development ...........................................................................................................................56

Agriculture and Farmers’ Welfare .....................................................................................................64

Road Transport and Highways ..........................................................................................................76

Education .........................................................................................................................................84

Health and Family Welfare ................................................................................................................97

Jal Shakti ........................................................................................................................................108

Telecommunications .......................................................................................................................119

Housing and Urban Affairs ..............................................................................................................126

Petroleum and Natural Gas .............................................................................................................136

Science and Technology .................................................................................................................143

Environment ...................................................................................................................................153

- 1 -

OverviewThe central government’s expenditure is authorised through the Union Budget by the Parliament every year.

The Constitution requires all expenditure (other than charged expenditure) to be submitted to Lok Sabha in the form of Ministry-wise Demand for Grants. These Demand for Grants are referred to the respective

Departmentally Related Standing Committees for detailed examination. They are then discussed in the House

and approved. After Lok Sabha authorises these demands, an Appropriation Bill is introduced and passed to

permit this expenditure out of the Consolidated Fund of India.

This document contains a short analysis of the Union Budget, and a close look at the allocations made by 15

ministries, which account for 54% of the total expenditure by the centre. Further, we analyse the allocation

trends over the years, and the extent of their utilisation. We also examine the implementation of various

schemes and policies and their resulting outcomes. Note that due to the impact of COVID-19, 2020-21 was not

a standard year with respect to the performance of the economy and government finances. In this note, we have

compared the budget estimates of 2021-22 with the actual expenditure for 2019-20 (in terms of compounded

annual growth rate or CAGR).

The Union Budget 2021-22 which was presented on February 1, 2021 proposes an expenditure of Rs 34,83,236

(net of devolution of taxes to states) for the year. This amount will be funded through receipts (other than

borrowings) of Rs 19,76,424 crore and borrowings of Rs 15,06,812 crore. Fiscal deficit is budgeted at 6.8% of

GDP as compared to 4.6% in 2019-20. The target for revenue deficit is 5.1% of the GDP, higher than the actual

revenue deficit of 3.3% in 2019-20.

Devolution to states from centre’s tax revenue is estimated to be Rs 6,65,563 crore in 2021-22, which is marginally higher than the devolution of Rs 6,50,678 crore in 2019-20. In 2020-21, the devolution to states

reduced by 30% from an estimate of Rs 7,84,181 crore at the budgeted stage to Rs 5,49,959 crore at the revised

stage. This would adversely impact the expenditure by states, especially for those where the taxes devolved

from the centre form a significant share of the revenue.

Besides the overall financial outlay, the budget also provides details of tax proposals in the Finance Bill. The

budget proposes to limit tax-free income from provident funds at Rs 2.5 lakh. Other proposals include: (i)

extension of certain temporary tax incentives up to the financial year 2021-22, (ii) levy of a new agriculture and

infrastructure development cess on petrol, diesel, and imports of certain items, and (iii) a reduction in the time

limit specified for reopening income tax assessments from six years to three years.

Allocations to the top 15 schemes account for 12% of the total expenditure. Mahatma Gandhi National Rural

Employment Guarantee Scheme (MGNREGS) has the highest allocation at Rs 73,000 crore. This is followed

by the allocation to the PM-KISAN scheme (income support to farmers) at Rs 65,000 crore.

The issues discussed in the analysis of each ministry include the following:

▪ Defence: The Ministry of Defence has been allocated Rs 4,78,196 crore. This constitutes 13.7% of the

central government’s budget and 2.1% of India’s estimated GDP for 2021-22. However, the share of

defence budget as a proportion of total government expenditure has decreased. The actual expenditure on

defence by the three armed forces has also been lower (by 12% to 36%) than the amount projected by the

three services. Expenditure on salaries forms the largest portion of the defence budget (30%), followed by

expenditure on capital outlay (27%) and pensions (24%).

▪ Consumer Affairs, Food and Public Distribution: The Ministry has two departments: (i) Food and Public

Distribution, which has been allocated Rs 2,42,836 crore (99% of the Ministry’s allocation), and (ii)

Consumer Affairs, which has been allocated Rs 2,974 crore. This year the allocation for food subsidy to

Food Corporation of India (FCI) has been increased significantly (64% annual increase over 2019-20) to

enable the FCI to clear its dues (loans it had taken from the NSSF).

▪ Railways: Railways’ revenue for 2021-22 is estimated at Rs 2,17,460 crore, which is an annual increase of

12% from the actual expenditure of 2019-20. Revenue expenditure by Railways is projected at Rs

2,10,899 crore which is an annual increase of 10% from the actual expenditure for 2019-20. The

Operating Ratio is estimated to be 96.2%. Due to the impact of COVID-19, the freight traffic volume in

2020-21 is estimated to decline by 7%, and consequently, Railways’ own revenue is estimated to decline

by 35% from the budget estimate

▪ Home Affairs: The Ministry of Home Affairs has been allocated Rs 1,66,547 crore. Since 2019,

expenditure of the Ministry also includes grants to the newly formed Union Territories (UTs) of Jammu

Overview PRS Legislative Research

- 2 -

and Kashmir, and Ladakh. 62% of the Ministry’s expenditure is on police (includes the central armed

police forces and Delhi Police), and 32% is on grants made to UTs.

▪ Rural Development: Expenditure by the Ministry of Rural Development is estimated at Rs 1,33,690 crore.

This Ministry administers some large schemes such as MGNREGS, PMAY-G (rural housing) and PMGSY

(rural roads). About 56% of the Ministry’s allocation is towards MGNREGS. In 2021-22, allocation

towards MGNREGS is estimated to increase at an annual rate of 1% compared to actual expenditure in

2019-20, while that for PMGSY is estimated to be increase by 3%.

▪ Agriculture: The Ministry has been allocated Rs 1,31,531 crore in 2021-22, which is a 14% annual

increase from the actual expenditure for 2019-20. 49% of the allocation to the Ministry in 2021-22 is for

the PM-KISAN scheme. All other programmes of the Ministry, including interest subsidy and crop

insurance, have been allocated Rs 66,531 crore in 2021-22, a 12% annual increase over 2019-20.

▪ Road Transport and Highways: Allocation to this Ministry is estimated at Rs 1,18,101 crore, an annual

increase of 23% over the actual expenditure for 2019-20. Between 2014 and 2019, the share of borrowings

in the investment on road sector has grown from 6% to 43%, while the share of both budgetary support and

private investment has decreased from 57% to 44% and from 37% to 13% respectively.

▪ Education: In 2021-22, the Ministry has been allocated Rs 93,224 crore, which is an annual increase of 2%

from the actual expenditure in 2019-20. Allocation to the Department of School Education and Literacy is

estimated at Rs 54,874 crore (59% of the Ministry’s total allocation). The Department of Higher

Education has been allocated Rs 38,351 crore. The allocation constitutes 2.67% of the central

government’s estimated expenditure for 2021-22. The National Education Policy, 2020 recommends

increasing public investment on education to 6% of GDP.

▪ Health: In 2021-22, the Ministry’s estimated expenditure is Rs 73,932 crore, which is an annual increase of

7% over the actual expenditure in 2019-20. In addition, Rs 35,000 crore is provided in the Finance

Ministry’s Demands towards COVID-19 vaccination. The Ministry is expected to have an additional

spending of Rs 15,817 crore at the revised stage in 2020-21, of which, Rs 14,217 crore will be spent for

COVID-19 emergency response, health system preparedness package, and COVID-19 vaccination.

▪ Jal Shakti: The Ministry estimates an expenditure of Rs 69,053 crore in 2021-22, which is a 64% annual

increase over the actual expenditure in 2019-20. The Jal Jeevan Mission, which aims to provide adequate

and safe drinking water to the rural population, has been allocated Rs 50,011 crore in 2021-22 (123%

annual increase over 2019-20). The 15th Finance Commission also recommends that 60% (Rs 1,42,084

crore) of the total grants for rural local bodies be spent on drinking water and sanitation during 2021-26.

▪ Telecommunications: The Department of Telecommunications has been allocated Rs 58,737 crore, which

is a 44% annual increase over the actual expenditure in 2019-20. This increase is to provide for the revival

plan for BSNL and MTNL. The non-tax revenue for 2021-22 from communication services is projected at

Rs 53,987 crore, an annual decrease of 12% over 2019-20.

▪ Housing and Urban Affairs: Expenditure by the Ministry is estimated at Rs 54,581 crore. Majority of this

expenditure is on metro projects (Rs 23,500 crore). Allocation towards urban housing (PMAY-Urban) is

estimated at Rs 8,000 crore which is an 8% annual increase from 2019-20. The Smart Cities Mission has

been allocated Rs 6,450 crore, which is a 42% annual increase over 2019-20.

▪ Petroleum and Natural Gas: The Ministry has been allocated Rs 15,944 crore, which is an annual decrease

of 39% over the actual expenditure for 2019-20. About 88% of the Ministry’s budget is towards LPG

subsidy. No funds have been allocated for kerosene subsidy. The share of total cess as a percentage of

total duty has increased from 56% in April, 2017 to 96% in February, 2021 in case of petrol.

▪ Science and Technology: The Ministry has been allocated Rs 14,794 crore, which is an annual increase of

8% over 2019-20. Almost all expenditure under the Ministry is revenue expenditure (99.7% on average).

In 2020-21, all departments saw a cut in the allocation at the revised stage compared to budget estimates

(20% on aggregate). India’s expenditure on research and development has been declining since 2004-05.

▪ Environment: The Ministry has been allocated Rs 2,870 crore, which is an annual increase of 6% over the

actual expenditure in 2019-20. 27% of the allocation is estimated to be on centrally sponsored schemes on

environment, forests and wildlife such as National Mission for Green India and Integrated Development of

Wildlife Habitats.

- 3 -

Budget at a Glance 2021-22Budget Highlights

▪ Expenditure: The government proposes to spend Rs 34,83,236 crore in 2021-22. As per the revised

estimates, the government spent Rs 34,50,305 crore in 2020-21, 13% higher than the budget estimate.

▪ Receipts: The receipts (other than borrowings) are expected to be Rs 19,76,424 crore in 2021-22, which is 23% higher than the revised estimates of 2020-21. In 2020-21, revised estimates for receipts were 29%

lower than budget estimates. Given the impact due to COVID-19, it is useful to see the growth from

20219-20, an annual average of 6.2%.

▪ GDP growth: Nominal GDP is expected to grow at of 14.4% (i.e., real growth plus inflation) in 2021-22.

▪ Deficits: Revenue deficit is targeted at 5.1% of GDP in 2021-22, which is lower than the revised estimate

of 7.5% in 2020-21 (3.3% in 2019-20). Fiscal deficit is targeted at 6.8% of GDP in 2021-22, down from the revised estimate of 9.5% in 2020-21 (4.6% in 2019-20). The government aims to steadily reduce fiscal

deficit to 4.5% of GDP by 2025-26.

▪ Ministry allocations: Among the top 13 ministries with the highest allocations, the highest annual increase

over 2019-20 is observed in the Ministry of Jal Shakti (64%), followed by the Ministry of Consumer

Affairs, Food and Public Distribution (48%) and the Ministry of Communications (31%).

Main tax proposals in the Finance Bill

▪ No changes in income tax rates for individuals and corporations.

▪ Limit on tax-free Income from provident funds: Tax exemption on the interest income on the

employees’ contributions to provident funds will be limited up to Rs 2.5 lakh.

▪ Extensions on tax incentives by a year upto the end of fiscal 2021-22. This includes tax deduction upto

Rs 1.5 lakh on interest on housing loan, and tax holiday for affordable housing projects, profits of startups,

and investing capital gains in start-ups.

▪ Agriculture and Infrastructure Development Cess: The cess will be levied on some imported items

including gold, silver, alcoholic beverages, coal, and cotton, and basic customs duty will be reduced by an

equal amount. The cess will be levied on petrol and diesel at the rate of Rs 2.5 and Rs 4 per litre

respectively, with equivalent cuts in excise duty. As the cess is not part of the divisible pool of revenue

shared with states, their revenue receipts will be adversely affected.

▪ Changes in customs duty: The duty has been increased on some items such as cotton, silk, some auto and

mobile parts.

▪ “Mini-budget” announcements made earlier: The safe harbour threshold for real estate transactions

above the circle rate increased from 10% to 20%. Encashment of leave travel concession will be exempt

from tax if the amount is used for purchasing certain goods.

▪ Reduction in time for income tax proceedings: Time limit for the re-opening of income tax assessment

will be reduced from 6 years presently to 3 years.

▪ Exemption from audit: Businesses which carry 95% of their transactions digitally and whose turnover is

less than five crore rupees, are exempted from keeping audited accounts. The threshold will be increased to

Rs 10 crore.

Non-Tax proposals in the Finance Bill

▪ There are some items that may not meet the Money Bill definition. These are listed below.

▪ LIC Act, 1956 amended to create a board of directors, issue shares, reduce government shareholding upto

51% of equity (minimum 75% in the first five years), cap voting rights at 5% to shareholders other than

central government.

▪ Securities Contracts (Regulations) Act, 1956 amended to allow pooled investment fund which collects

money from investors. They may borrow money or issue debt securities. Consequential amendments made

in SARFAESI Act, 2002 and in the Recovery of Debts due to Banks and Financial Institutions Act, 1993.

▪ SEBI Act, 1992 amended to require registration by Alternative Investment Trusts and Business Trusts.

Budget at a Glance PRS Legislative Research

- 4 -

Policy Highlights

▪ Legislative Changes: A Securities Markets Code will be introduced to consolidate four Acts including the

SEBI Act, 1992 and the Government Securities Act, 2007. The Insurance Act, 1938 will be amended to

increase the permissible FDI limits in insurance companies from 49% to 74%, and allow foreign ownership

and control with safeguards. The Companies Act, 2013 will be amended to revise the definition of small

companies by increasing threshold for paid up capital (from Rs 50 lakh to Rs 2 crore) and annual turnover (from Rs 2 crore to Rs 20 crore). Certain offences under the Limited Liability Partnership Act, 2008 will be

decriminalised. The Deposit Insurance and Credit Guarantee Corporation Act, 1961 will be amended to

ensure that depositors get time-bound and easy access to their deposits to the extent of their insurance cover.

The minimum loan size for NBFCs to be eligible for debt recovery under the SARFAESI Act, 2002 will be

reduced from Rs 50 lakh to Rs 20 lakh.

▪ Disinvestment: Disinvestment of Air India, IDBI Bank, and Pawan Hans will be completed in 2021-22.

Legislative amendments will be introduced to privatise two public sector banks and a General Insurance

company. The IPO for LIC will also be completed in 2021-22. The government has approved a strategic

disinvestment policy under which CPSEs will be maintained only in four sectors, with the rest being

privatised. States will be incentivised to disinvest their public sector companies. A Special Purpose Vehicle

will be used to monetise government owned land.

▪ Finance: An Asset Reconstruction Company Limited and Asset Management Company will be set up to

consolidate and take over existing stressed debt, and manage and dispose assets. An institutional framework

will be created for the corporate bond market to instil confidence among participants and enhance liquidity

of secondary markets. An investor charter will be introduced for financial investors across all products.

▪ Corporate Affairs: Alternate methods of debt resolution and special frameworks for MSMEs will be

introduced. A Conciliation Mechanism will be set up for quick resolution of contractual disputes.

▪ Commerce and Industry: Seven textile parks will be established over three years to create infrastructure

and increase exports. Incorporation of one-person companies will be encouraged by regulatory changes such

as removal of restrictions on paid up capital and turnover, and NRIs will be allowed to establish such

companies.

▪ Labour and Employment: A portal to collect information on gig workers, and construction workers,

among others will be launched to help frame schemes on health, housing, insurance, and others for migrant

unorganised workers. The Apprenticeship Act will be amended to enhance apprenticeship opportunities.

▪ Health and Nutrition: PM Atma Nirbhar Swasth Bharat Yojana will be launched to develop capacity of

health systems, strengthen national institutions, and create institutions to detect and cure new and emerging

diseases. Mission Poshan 2.0 will be launched after merging Supplementary Nutrition Programme and the

Poshan Abhiyan to strengthen nutrition outcomes. The National Nursing and Midwifery Commission Bill

will be introduced.

▪ Education: Legislation to set-up a Higher Education Commission of India will be introduced, having

vehicles for standard-setting, accreditation, regulation, and funding. A grant to create formal umbrella

structures for institutes of higher education in nine cities will be created. More than 15,000 schools will be

strengthened to include all components of the National Education Policy and subsequently mentor other

schools to achieve ideals of Policy.

▪ Infrastructure and Real Estate: A Bill to establish a Development Financial Institution for infrastructure

financing will be introduced. The DFI will be used to establish a lending portfolio of at least five lakh crore

rupees for financing infrastructure projects. A National Monetisation Pipeline of potential infrastructure

assets such as dedicated freight corridor assets of the railways will be launched. Debt financing of real estate

and infrastructure investment trusts by foreign portfolio investors will be enabled to ease access of finance in

the infrastructure and real estate sectors.

▪ Transport: Economic corridors to augment road infrastructure are being planned in Tamil Nadu, Kerala,

West Bengal, and Assam. A scheme to enable private sector to finance, acquire, operate and maintain buses

in public transport services will be launched. New technologies including MetroLite and MetroNeo will be

used to develop metro rail systems in Tier-1 and Tier-2 cities. Seven projects for major ports will be offered

on public-private partnership mode in 2021-22. A voluntary vehicle scrapping policy to phase out old and

unfit vehicles was also announced.

▪ Energy: A reforms-based scheme to provide assistance to power distribution companies for infrastructure

creation will be launched to address concerns over viability. A framework to provide choice to consumers


- 5 -

among distribution companies will be launched. Ujjwala scheme will be extended to cover one crore more

beneficiaries. An independent gas transport system operator will be set up to coordinate booking of common

carrier capacity in all natural-gas pipelines. A Hydrogen Energy Mission to generate hydrogen from green

power sources will be launched.

▪ Agriculture and allied sectors: Operation Green Scheme, currently applicable to tomatoes, onions, and

potatoes, will be enlarged to include 22 perishable products. The Agriculture Infrastructure Fund will be

made available to APMCs to improve infrastructure facilities.

▪ Water and Sanitation: The Jal Jeevan Mission (Urban) will be implemented to enable universal water

supply and liquid waste management in urban areas. The Urban Swachh Bharat Mission 2.0 will focus on

sludge and waste water management, and on ensuring a reduction in single-use plastic and air pollution.

▪ Science and Technology: A scheme to provide financial incentives for digital modes of payments has been

proposed. The Deep Ocean Mission will be launched, covering explorations and conservation of bio-

diversity.

▪ Social Justice: To facilitate credit flow for SCs, STs, and women, margin money requirement under Stand-

Up India scheme will be reduced from 25% to 15%. 750 Eklavya model residential schools will be

established in tribal areas.


- 6 -

Budget estimates of 2021-22 as compared to actuals for 2019-20

The Finance Minister, Ms. Nirmala Sitharaman, introduced Budget 2021-22 on February 1, 2021, amidst the

COVID-19 pandemic. 2020-21 was a non-standard year with respect to the performance of the economy and

government finances. In this note, the budget estimates for 2021-22 have been compared to the actual

expenditure for 2019-20.

▪ Total Expenditure: The government is estimated to spend Rs 34,83,236 crore during 2021-22 which is

an annual increase of 14% over 2019-20. Out of the total expenditure, revenue expenditure is estimated

to be Rs 29,29,000 crore (12% annual increase over 2019-20) and capital expenditure is estimated to be

Rs 5,54,236 crore (29% annual increase over 2019-20).

▪ Total Receipts: The government receipts (excluding borrowings) are estimated to be Rs 19,76,424 crore,

annual increase of 6% over 2019-20. Borrowings are estimated at Rs 15,06,812 crore (27% annual

increase over 2019-20).

▪ Transfer to states: The central government will transfer Rs 13,88,502 crore to states and union

territories in 2021-22 (annual increase of 10% over 2019-20). This includes devolution of (i) Rs

6,65,563 crore to states, out of the centre’s share of taxes (increase of 1%), and (ii) Rs 7,22,939 crore in

the form of grants and loans (increase of 21%). In 2020-21, while devolution to states fell by 30% at the

revised stage (compared to budget estimates), grants were higher by 26%.

▪ Deficits: Revenue deficit is targeted at 5.1% of GDP, and fiscal deficit is targeted at 6.8% of GDP in

2021-22. The target for primary deficit (which is fiscal deficit excluding interest payments) is 3.1% of

GDP. In 2020-21, as per the revised estimate, revenue deficit is 7.5% of GDP, and fiscal deficit is 9.5%

of GDP.

▪ GDP growth estimate: The nominal GDP is estimated to grow at a rate of 14.4% in 2021-22. In Budget

2020-21, GDP was estimated to grow at 10%, which was revised to -13%.

Table 1: Budget at a Glance 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted 2021-22

Change (Annualised)

(Actuals 2019-20 to BE

2021-22)

Revenue Expenditure 23,50,604 26,30,145 30,11,142 29,29,000 12%

Capital Expenditure 3,35,726 4,12,085 4,39,163 5,54,236 29%

of which:

Capital outlay 3,11,312 3,80,322 3,32,247 5,13,862 29%

Loans 24,414 31,763 1,06,916 40,374 29%

Total Expenditure 26,86,330 30,42,230 34,50,305 34,83,236 14%

Revenue Receipts 16,84,059 20,20,926 15,55,153 17,88,424 3%

Capital Receipts 68,620 2,24,967 46,497 1,88,000 66%

of which:

Recoveries of Loans 18,316 14,967 14,497 13,000 -16%

Other receipts (including disinvestments) 50,304 2,10,000 32,000 1,75,000 87%

Total Receipts (without borrowings) 17,52,679 22,45,893 16,01,650 19,76,424 6%

Revenue Deficit 6,66,545 6,09,219 14,55,989 11,40,576 31%

% of GDP 3.3% 2.7% 7.5% 5.1%

Fiscal Deficit 9,33,651 7,96,337 18,48,655 15,06,812 27%

% of GDP 4.6% 3.5% 9.5% 6.8%

Primary Deficit 3,21,581 88,134 11,55,755 6,97,111 47%

% of GDP 1.6% 0.4% 5.9% 3.1%

Notes: Budgeted estimates (BE) are budget allocations announced at the beginning of each financial year. Revised Estimates (RE) are estimates

of projected amounts of receipts and expenditure until the end of the financial year. Actual amounts are audited accounts of expenditure and

receipts in a year. Change from Actuals 2019-20 to BE 2021-22 represents the compounded annual growth rate (CAGR) for the period.

Sources: Budget at a Glance, Union Budget Documents 2021-22; PRS.


- 7 -

▪ Expenses which bring a change to the government’s assets or liabilities (such as construction of roads or

recovery of loans) are capital expenses, and all other expenses are revenue expenses (such as payment of

salaries or interest payments).

▪ In 2021-22, capital expenditure is estimated at Rs 5,54,236 crore (annual increase of 29% over 2019-20).

Revenue expenditure is estimated to be Rs 29,29,000 crore (annual increase of 12% over 2019-20). In 2020-

21, total expenditure was 13% higher than the budget estimate, with revenue expenditure increasing by 15%

and capital expenditure by 7%.

▪ In 2019-20, capital outlay formed 12% of the total expenditure of the central government. This is estimated to

increase to 15% of the total expenditure in 2021-22.

▪ In 2021-22, disinvestment is estimated at Rs 1,75,000 crore which is 3.5 times higher than the actual

disinvestment in 2019-20. The highest disinvestment achieved over the last few years was in 2017-18, of Rs

1,00,045 crore.


- 8 -

Receipts Highlights for 2021-22

▪ Total receipts (including borrowings) in 2021-22 are estimated to be Rs 34,83,236 crore and net

receipts (excluding borrowings) are estimated at Rs 19,76,424 crore. Receipts (without borrowings)

are estimated to record an annual increase of 6% over 2019-20.

▪ Gross tax revenue is estimated at Rs 22,17,029 crore (annual increase of 5% over 2019-20). Net tax

revenue of the central government (excluding states’ share in taxes) is estimated to be Rs 15,45,397

crore in 2021-22.

▪ Devolution to states from centre’s tax revenue is estimated to be Rs 6,65,563 crore in 2021-22,

marginally higher than the devolution of Rs 6,50,678 crore in 2019-20.

▪ Non-tax revenue is expected to be Rs 2,43,028 crore in 2021-22 an annual decrease of 14% over the

actuals for 2019-20.

▪ Capital receipts (without borrowings) are estimated to record an annual increase of 66% over 2019-

20. This is on account of disinvestments, which are expected to be Rs 1,75,000 crore in 2021-22, as

compared to Rs 50,304 crore in 2019-20. Borrowings are expected to be Rs 15,06,812 crore in 2021-

22 (annual increase of 27% over 2019-20). Borrowings in 2021-22 are estimated to be lower than the

revised estimate for 2020-21 (of Rs 18,48,655 crore) by 19%.

Table 2: Break up of central government receipts in 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted 2021-22

Change (Annualised) (Actuals 2019-20 to BE

2021-22)

Gross Tax Revenue 20,10,059 24,23,020 19,00,280 22,17,059 5%

of which:

Corporation Tax 5,56,876 6,81,000 4,46,000 5,47,000 -1%

Taxes on Income 4,92,654 6,38,000 4,59,000 5,61,000 7%

Goods and Services Tax 5,98,750 6,90,500 5,15,100 6,30,000 3%

Customs 1,09,283 1,38,000 1,12,000 1,36,000 12%

Union Excise Duties 2,40,615 2.67,000 3,61,000 3,35,000 18%

Service Tax 6,029 1,020 1,400 1,000 -59%

A. Centre's Net Tax Revenue 13,56,902 16,35,909 13,44,501 15,45,397 7%

Devolution to States 6,50,678 7,84,181 5,49,959 6,65,563 1%

B. Non Tax Revenue 3,27,157 3,85,017 2,10,653 2,43,028 -14%

of which:

Interest Receipts 12,349 11,042 14,005 11,541 -3%

Dividend and Profits 1,86,132 1,55,396 96,544 1,03,538 -25%

Other Non-Tax Revenue 1,28,675 2,18,580 1,00,105 1,27,949 -0.3%

C. Capital Receipts (without borrowings)

68,620 2,24,967

46,497 1,88,000

66%

of which:

Disinvestment 50,304 2,10,000 32,000 1,75,000 87%

Receipts (without borrowings) (A+B+C)

17,52,679 22,45,893 16,01,651 19,76,424 6%

Borrowings 9,33,651 7,96,337 18,48,655 15,06,812 27%

Total Receipts (including borrowings)

26,86,330 30,42,230 34,50,306 34,83,236 14%

Sources: Receipts Budget, Union Budget Documents 2021-22; PRS.

▪ Indirect taxes: The total indirect tax collections are estimated to be Rs 11,02,000 crore in 2021-22. Of

this, the government has estimated to raise Rs 6,30,000 crore from GST. Out of the total tax collections

under GST, 84% is expected to come from central GST (Rs 5,30,000 crore), and 16% (Rs 1,00,000 crore)

from the GST compensation cess.

▪ Union Excise Duties: Revenue from Union Excise Duties is estimated at Rs 3,35,000 crore (annual increase of 18% over 2019-20). In 2020-21, the revised estimate for revenue from excise duties was higher

than the budget estimate by 35% due to revenue from duty on petrol and diesel.

▪ Corporation tax: The collections from taxes on companies are expected to be Rs 5,47,000 crore in 2021-

22, marginally lower (1%) than 2019-20. In 2020-21, as per revised estimates, revenue from corporation


- 9 -

tax was Rs 4,46,000 crore, 35% lower than the budget estimate. Among all direct taxes revenue from

corporation tax declined the most.

▪ Income tax: The collections from income tax are expected to record an annual increase of 7% in 2021-22 to

Rs 5,61,000 crore. In 2020-21, the revised estimate for revenue from income tax was 28% lower than the

budget estimate.

▪ Non-tax receipts: Non-tax revenue consists of interest receipts on loans given by the centre, dividends and

profits, external grants, and receipts from general, economic, and social services, among others. Non-tax

revenue is expected to decrease by 14% over 2019-20 to Rs 2,43,028 crore. The decline is due to a 40% fall

in the dividend received from the Reserve Bank of India, nationalised banks and other financial institutions

owned by the government.

▪ Disinvestment target: The disinvestment target for 2021-22 is Rs 1,75,000 crore. This target is 3.5 times

higher than the disinvestment of Rs 50,304 crore in 2019-20.


- 10 -

Expenditure Highlights for 2020-21

▪ Total expenditure in 2021-22 is expected to be Rs 34,83,236 crore, which is 1% higher than the revised

estimate of 2020-21. Expenditure in 2021-22 has increased at an annual rate of 14% over 2019-20. Out of

this, (i) Rs 10,51,703 crore is proposed to be spent on central sector schemes (18% annual increase over

2019-20), and (ii) Rs 3,81,305 crore is proposed to be spent on centrally sponsored schemes (11% annual

increase over 2019-20).

▪ The government is expected to spend Rs 8,09,701 crore on interest payments in 2021-22, which is 17%

higher than the revised estimate of 2020-21. It makes up 23% of the government’s estimated expenditure

in 2021-22. Expenditure on pensions in 2021-22 is expected to be Rs 1,89,328 crore.

Table 3: Break up of central government expenditure in 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted 2021-22

Change (Annualised)

(Actuals 2019-20 to BE 2021-22)

Central Expenditure

Establishment Expenditure of Centre 5,70,244 6,09,585 5,98,672 6,09,014 3%

Central Sector Schemes/ Projects 7,57,091 8,31,825 12,63,690 10,51,703 18%

Other Expenditure 7,27,025 8,87,574 8,26,536 10,11,887 18%

Centrally Sponsored Schemes

and other transfers

Centrally Sponsored Schemes 3,09,553 3,39,895 3,87,900 3,81,305 11%

Finance Commission Grants 1,23,710 1,49,925 1,82,352 2,20,843 34%

of which:

Rural Local Bodies 59,361 69,925 60,750 44,901 -13%

Urban Local Bodies 25,098 30,000 25,000 22,114 -6%

Grants-in-aid 10,938 20,000 22,262 35,376 80%

Post Devolution Revenue Deficit Grants

28,314 30,000 74,340 1,18,452 105%

Other Grants 1,98,707 2,23,427 1,91,155 2,08,484 2%


Sources: Budget at a Glance, Union Budget Documents 2021-22; PRS.

Expenditure on Subsidies: In 2021-22, the total expenditure on subsidies is estimated to be Rs 3,69,899 crore, an annual increase of 19% over 2019-20. This is largely due to a higher allocation to food subsidy. Details are

given below (Table 4):

▪ Food subsidy: Allocation to food subsidy is estimated at Rs 2,42,836 crore in 2021-22, a 49% annual

increase as compared to 2019-20. In 2020-21 budget, Rs 1,15,570 crore was allocated to food subsidy.

However, the revised estimate is 266% higher than the budgeted estimate at Rs 4,22,618 crore. According

to the budget speech, additional allocation has been made in the 2021-22 budget to clear the pending food

subsidy dues of the Food Corporation of India.

▪ Fertiliser subsidy: Expenditure on fertiliser subsidy is estimated at Rs 79,530 crore in 2021-22, a 1%

annual decrease as compared to 2019-20. In 2020-21, the revised allocation to fertiliser subsidy is 88%

higher than the budgeted allocation.

▪ Petroleum subsidy: Allocation to petroleum subsidy decreased at an annual rate of 40% from 2019-20 to

2021-22. The allocation in 2021-22 is 64% lower than the 2020-21 revised estimate at Rs 14,073 crore.

Petroleum subsidy consists of subsidy on LPG and kerosene. In 2021-22, the LPG subsidy is estimated to

decrease to Rs 14,073 crore (from Rs 36,072 crore in 2020-21) and no allocation has been made for the

kerosene subsidy (as compared to Rs 2,982 crore in 2020-21).

▪ Other subsidies: The government also provides certain other subsidies such as interest subsidies on loans

given under various government schemes and subsidies for procurement of agricultural produce other than

paddy and wheat. In 2021-22, the expenditure on these other subsidies is estimated to be Rs 33,460 crore, a

1% annual decrease over 2019-20.


- 11 -

Table 4: Subsidies in 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted

2021-22

Change (Annualised) (Actuals 2019-20 to BE 2021-

22)

Food subsidy 1,08,688 1,15,570 4,22,618 2,42,836 49%

Fertiliser subsidy 81,124 71,309 1,33,947 79,530 -1%

Petroleum subsidy 38,529 40,915 39,055 14,073 -40%

Other subsidies 33,963 34,315 53,116 33,460 -1%

Total 2,62,304 2,62,109 6,48,736 3,69,899 19%

Sources: Expenditure Profile, Union Budget 2020-21; PRS.

Expenditure by Ministries: The ministries with the 13 highest allocations account for 53% of the total

budgeted expenditure in 2021-22. Of these, the Ministry of Defence has the highest allocation in 2021-22 at Rs

4,78,196 crore (14% of the total budgeted expenditure of the government). Other Ministries with high

allocation include: (i) Consumer Affairs, Food and Public Distribution, (ii) Home Affairs, (iii) Rural

Development, and (iv) Agriculture and Farmers’ Welfare. Table 5 shows the expenditure on Ministries with the

13 highest allocations for 2021-22 and the annual growth estimated over 2019-20.

Table 5: Ministry-wise expenditure in 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted

2021-22


2021-22)

Defence 4,52,996 4,71,378 4,84,736 4,78,196 3%

Consumer Affairs, Food and Public Distribution 1,17,096 1,24,535 4,50,687 2,56,948 48%

Home Affairs 1,34,978 1,67,250 1,49,388 1,66,547 11%

Rural Development 1,23,622 1,22,398 1,98,629 1,33,690 4%

Agriculture and Farmers' Welfare 1,01,775 1,42,762 1,24,520 1,31,531 14%

Road Transport and Highways 78,249 91,823 1,01,823 1,18,101 23%

Railways 69,972 72,216 1,11,234 1,10,055 25%

Education 89,437 99,312 85,089 93,224 2%

Chemicals and Fertilisers 82,063 71,897 1,35,559 80,715 -1%

Communications 43,939 81,957 61,060 75,265 31%

Health and Family Welfare 64,258 67,112 82,928 73,932 7%

Jal Shakti 25,683 30,478 24,286 69,053 64%

Housing and Urban Affairs 42,054 50,040 46,791 54,581 14%

Other Ministries 12,60,209 14,49,071 13,93,577 16,41,398 14%


Note: Expenditure is net of recoveries such as fines, and ticket sales.

Sources: Expenditure Budget, Union Budget 2021-22; PRS.

▪ Ministry of Consumer Affairs, Food and Public Distribution: Allocation to the Ministry in 2021-22

saw an annual increase of 48% over 2019-20 due to a higher allocation for food subsidy. Due to the same

reason, the Ministry’s revised allocation for 2020-21 has also been increased, by Rs 3,26,151 crore (262%)

from the budgeted allocation for the year.

▪ Ministry of Railways: Allocation to the Ministry of Railways in 2021-22 is Rs 1,10,055 crore, an annual

increase of 25% over 2019-20. 2020-21 RE includes Rs 79,398 crore allocated through a special loan to: (i)

bridge the resource gap of Indian Railways caused due to COVID-19 in 2020-21, and (ii) clear its pension

dues for the year 2019-20.

▪ Ministry of Health and Family Welfare: Allocation to the Ministry of Health and Family Welfare in

2021-22 is Rs 73,932 crore, an annual increase of 7% over 2019-20. In 2020-21, the Ministry was allocated

Rs 67,112 crore at the budgeted stage, which has been increased by 24% to Rs 82,928 crore at the revised

stage. This increase is primarily due to an allocation of Rs 11,757 crore for the COVID-19 Emergency

Response and Health System Preparedness Package.

▪ Ministry of Jal Shakti: Allocation to the Ministry increased to Rs 69,053 crore in 2021-22, which is 184% higher than the revised estimate of 2020-21. This increase is primarily due to a higher allocation for the Jal

Jeevan Mission (earlier known as the National Rural Drinking Water Mission), which accounts for 72% of

the allocation to the Ministry.


- 12 -

Expenditure on Major Schemes

Table 6: Scheme-wise allocation in 2021-22 (Rs crore)

Actuals 2019-20

Budgeted 2020-21

Revised 2020-21

Budgeted

2021-22


2021-22)

MGNREGS 71,687 61,500 1,11,500 73,000 1%

PM-KISAN 48,714 75,000 65,000 65,000 16%

Jal Jeevan Mission* 10,030 11,500 11,000 50,011 123%

National Health Mission 35,155 34,115 35,554 37,130 3%

National Education Mission 33,654 39,161 28,244 34,300 1%

Pradhan Mantri Awas Yojana 24,964 27,500 40,500 27,500 5%

Integrated Child Development Services

22,032 28,557 20,038 24,114# 5%

Pradhan Mantri Fasal Bima Yojana

12,639 15,695 15,307 16,000 13%

Pradhan Mantri Gram Sadak Yojana

14,017 19,500 13,706 15,000 3%

National Livelihood Mission 9,755 10,005 10,005 14,473 22%

AMRUT and Smart Cities Mission 9,599 13,750 9,850 13,750 20%

Green Revolution 9,895 13,320 10,474 13,408 16%

Swachh Bharat Mission 9,469 12,294 7,000 12,294 14%

Pradhan Mantri Krishi Sinchai Yojana

8,200 11,127 7,954 11,588 19%

Mid-Day Meal Programme 9,699 11,000 12,900 11,500 9%

Note: *Earlier known as the National Rural Drinking Water Mission. #Umbrella ICDS scheme till 2020-21 and sum of its individual

schemes in 2021-22. Sources: Expenditure Profile, Union Budget 2021-22; PRS.

▪ Among schemes, the MGNREGS has the highest allocation in 2021-22 at Rs 73,000 crore. Allocation to

the scheme has seen an annual increase of 1% over 2019-20. However, in 2020-21, allocation to the

scheme has been increased by Rs 50,000 crore (81%) from the budgeted stage to the revised stage,

following the announcement made under the Aatmanirbhar Bharat Economic Package in May 2020.

▪ The PM-KISAN scheme (income support to farmers) has the second highest allocation in 2021-22 at Rs 65,000 crore, an annual increase of 16% over 2019-20. In 2020-21, allocation to the scheme has decreased

by 13% from Rs 75,000 crore at the budgeted stage to Rs 65,000 crore at the revised stage.

▪ Allocation to the Jal Jeevan Mission (earlier known as the National Rural Drinking Water Mission) has

increased by 355% over the revised estimate of 2020-21 to Rs 50,011 crore.

COVID-19 vaccination: The central government has allocated Rs 35,000 crore to the Ministry of Finance for COVID-19 vaccination in 2021-22. This allocation has been made for providing financial assistance to states to meet their expenditure on COVID-19 vaccination.

Expenditure on Scheduled Caste and Scheduled Tribe sub-plans and schemes for welfare of women,

children and NER

▪ Programmes for the welfare

of women and children

have been allocated Rs

2,39,039 crore in 2021-22,

a decrease of 17% over the revised estimate of 2020-

21. These allocations

include programmes under

all the ministries.

▪ The sub-plans for

Scheduled Castes and

Scheduled Tribes have

been allocated a total of Rs 2,06,201 crore in 2021-22, which is a 51% increase over the revised estimate of

2020-21.

Table 7: Allocations for women, children, SCs, STs and NER (Rs crore)

Budgeted 2020-21

Revised 2020-21

Budgeted 2021-22

% change (RE 2020-21 to

BE 2021-22)

Welfare of Women 1,43,462 2,07,261 1,53,326 -26.0%

Welfare of Children 96,042 80,462 85,713 6.5%

Scheduled Castes 83,257 82,708 1,26,259 52.7%

Scheduled Tribes 53,653 53,304 79,942 50.0%

North Eastern Region (NER) 60,112 51,271 68,020 32.7%



- 13 -

Deficits, Debt and FRBM

The Fiscal Responsibility and Budget Management (FRBM) Act, 2003 requires the central government to

progressively reduce its outstanding debt, revenue deficit and fiscal deficit. The central government gives three-

year rolling targets for these indicators when it presents the Union Budget each year. The government was

supposed to achieve fiscal deficit of 3% of GDP by March 31, 2021. In Budget 2020-21, the fiscal deficit target

was relaxed to 3.5% (as permitted by the FRBM Act) and it was estimated that fiscal deficit of 3.1% will be

achieved by 2022-23. In 2021-22, the government has not provided target for the next three years, and will

amend the FRBM Act to accommodate the higher fiscal deficit.

Fiscal deficit is an indicator of borrowings by the government

for financing its expenditure. The estimated fiscal deficit for

2021-22 is 6.8% of GDP. For 2020-21, fiscal deficit is

estimated at 9.5% of GDP, higher than the budget estimate of

3.5%. This was primarily due to higher spending, and lower

revenue collection due to COVID-19. The government intends

to reach fiscal deficit of 4.5% by 2025-26.

Table 8: Deficits (as % of GDP)

Actuals 2019-20

Revised 2020-21

Budgeted 2021-22

Fiscal Deficit 4.6% 9.5% 6.8%

Revenue Deficit 3.3% 7.5% 5.1%

Sources: Union Budget 2021-22; PRS.

Note that in 2019-20 and 2020-21, the government showed certain expenditure carried out by public sector

entities (such as the Food Corporation of India) as extra-budgetary resources, which was not included in the

fiscal deficit calculation. In 2020-21, extra-budgetary resources were estimated at 0.9% of GDP. Extra-

budgetary resources for 2020-21 were revised downwards to 0.6% of GDP. In 2021-22, extra-budgetary

resources are estimated to be 0.1% of GDP as the government has accounted for most of the extra-budgetary

resources in the budget.

Sources: Medium Term Fiscal Policy Statement, Union Budget (multiple years); PRS.

▪ Revenue deficit is the excess of revenue expenditure over revenue receipts. Such a deficit implies the

government’s need to borrow funds to meet expenses which may not provide future returns. The estimated

revenue deficit for 2021-22 is 5.1% of GDP. In 2020-21, revenue deficit was 7.5%, higher than the budget

estimate of 2.7%.

▪ Outstanding debt is the accumulation of borrowings over the years. A higher debt implies that the government

has a higher loan repayment obligation over the years. Outstanding debt of the government decreased from

66.7% of GDP in 2004-05 to 48% of GDP in 2018-19. The revised estimate of outstanding debt for 2019-20

was 48%. However, the Medium-Term Fiscal Policy Statement has not given the estimate of outstanding debt

for 2021-22, or revised estimate for 2020-21. High borrowings in the current year (indicated by fiscal deficit)

and increase in outstanding debt leads to high interest cost. In 2021-22, interest payments are estimated to be

15% higher than the interest obligations in 2019-20. Interest payment is estimated at 45% of revenue receipts in 2021-22, up from 36% in 2019-20.

Recommendations by the 15th Finance Commission: The 15th Finance Commission for 2021-26 suggested a

path for fiscal consolidation for the centre by reducing fiscal deficit to 4% of GDP, and outstanding liabilities to

56.6% by 2025-26. For details on recommendations of the Commission see the Annexure

Table 9: Suggested path for fiscal consolidation (as % of GDP)

2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

Fiscal Deficit 7.4% 6.0% 5.5% 5.0% 4.5% 4.0%

Revenue Deficit 5.9% 4.9% 4.5% 3.9% 3.3% 2.8%

Outstanding liabilities 62.9% 61.0% 61.0% 60.1% 58.6% 56.6%

Sources: Report of the 15th Finance Commission for 2021-26; PRS.

0%

2%

4%

6%

8%

2000

-01

2002

-03

2004

-05

2006

-07

2008

-09

2010

-11

2012

-13

2014

-15

2016

-17

2018

-19

2020

-21

Fiscal Deficit: Budgeted vs Actual (% of GDP)

Budgeted Actual

0%

2%

4%

6%

2000

-01

2002

-03

2004

-05

2006

-07

2008

-09

2010

-11

2012

-13

2014

-15

2016

-17

2018

-19

2020

-21

Revenue Deficit: Budgeted vs Actual (% of GDP)

Budgeted Actual


- 14 -

Annexure: Recommendations of the 15th Finance Commission for 2021-26

The 15th Finance Commission (Chair: Mr. N. K. Singh) has submitted two reports. The first report, consisting

of recommendations for the financial year 2020-21, was tabled in Parliament in February 2020. The final report

with recommendations for the 2021-26 period was tabled in Parliament on February 1, 2021. Key

recommendations of the Commission include:

▪ Devolution Criteria: The criteria for distribution

of central taxes among states for 2021-26 period is

same as that for 2020-21. The Commission has

used 2011 population data for determining the share of states during its entire award period. To reward

efforts made by states in controlling their

population, the Commission has used the

Demographic Performance criterion. States with a

lower fertility ratio will be scored higher on this

criterion.

▪ Grants-in-aid: The Commission has recommended

grants from the centre to states and local bodies

worth Rs 10.3 lakh crore for the 2021-26 period.

These include: (i) revenue deficit grants to 17 states,

(ii) grants to urban and rural local bodies, (iii)

disaster management grants, (iv) grants for eight sectors including health, education, and agriculture,

and (v) certain state-specific grants (see Table 11).

▪ Funding of defence and internal security: A

dedicated non-lapsable fund called the

Modernisation Fund for Defence and Internal

Security (MFDIS) will be constituted to primarily

bridge the gap between budgetary requirements and

allocation for capital outlay in defence and internal

security. The fund will have an estimated corpus of

Rs 2,38,354 crore over the five years (2021-26). Of

this, Rs 1,53,354 crore will be transferred from the Consolidated Fund of India. Rest of the amount

will be generated from measures such as

disinvestment of defence PSUs and monetisation of

defence lands.

▪ Fiscal consolidation: The Commission suggested

that the Centre bring down fiscal deficit to 4% of

GDP by 2025-26. It recommended the fiscal deficit

limit (as % of GSDP) for states to be: (i) 4% in

2021-22, (ii) 3.5% in 2022-23, and (iii) 3% during

2023-26. Extra annual borrowing worth 0.5% of

GSDP will be allowed to states during 2021-25 for

undertaking power sector reforms.

Table 10: Criteria for devolution

Criteria 14th FC 2015-20

15th FC 2020-21

15th FC 2021-26

Income Distance 50.0 45.0 45.0

Area 15.0 15.0 15.0

Population (1971) 17.5 - -

Population (2011)# 10.0 15.0 15.0

Demographic Performance - 12.5 12.5

Forest Cover 7.5 - -

Forest and Ecology - 10.0 10.0

Tax and fiscal efforts* - 2.5 2.5

Total 100 100 100

Note: #14th FC used the term “demographic change” which was defined as

Population in 2011. *The report for 2020-21 used the term “tax effort”, however,

there is no difference in the definition of the criteria.

Sources: Reports of the 14th and 15th Finance Commissions; PRS.

Table 11: Grants for 2021-26 (five years) (Rs crore)

Grants Amount

Revenue deficit grants 2,94,514

Local governments grants 4,36,361

Disaster management grants 1,22,601

Sector-specific grants 1,29,987

Health 31,755

School Education 4,800

Higher Education 6,143

Implementation of agricultural reforms 45,000

Maintenance of PMGSY roads 27,539

Judiciary 10,425

Statistics 1,175

Aspirational districts and blocks 3,150

State-specific grants 49,599

Total 10,33,062 Source: Report of the 15th Finance Commission; PRS.

▪ The Commission observed that the recommended path for fiscal deficit for the Centre and states will result

in a reduction of total liabilities of: (i) the Centre from 62.9% of GDP in 2020-21 to 56.6% in 2025-26, and

(ii) the states on aggregate from 33.1% of GDP in 2020-21 to 32.5% by 2025-26. It recommended forming

a high-powered inter-governmental group to: (i) review the fiscal responsibility legislation (FRBM Act), (ii)

recommend a new fiscal responsibility framework and oversee its implementation.

- 15 -

Demand for Grants: Defence The Ministry of Defence frames policies on

defence and security-related matters, and ensures

its implementation by the defence services (i.e.

Army, Navy and Air Force). In addition, it is

responsible for production establishments such as

ordnance factories and defence public sector undertakings, research and development

organisations, and ancillary services that assist the

defence services, such as the Armed Forces

Medical Services.

This note analyses budgetary allocation and

expenditure trends of the Ministry. The note also

discusses certain issues such as large pension

expenditure, lower capital outlay, and high import

dependence for defence procurement.

Overview of finances

In 2021-22, the Ministry of Defence has been

allocated Rs 4,78,196 crore. This includes

expenditure on salaries of armed forces and

civilians, pensions, modernisation of armed forces,

production establishments, maintenance, and

research and development organisations.

The allocation to the Ministry of Defence is the

highest (14%) among all ministries of the central

government.

Defence budget has decreased as a proportion of

total government expenditure

In the last decade (2011-12 to 2021-22), the budget

of the Ministry of Defence has grown at an annual

average rate of 8.4%, while total government

expenditure has grown at 10.3%.

Figure 1: Budget of Ministry of Defence (2011-

12 to 2021-22) (in Rs crore)

Note: Figures for 2021-22 are Budget Estimates and for 2020-21

are Revised Estimates.

Sources: Union Budget Documents 2011-2022; PRS.

During this period, defence expenditure as a

proportion of central government expenditure

decreased from 16.4%, to 13.7%. The year-wise

budget of the Ministry is shown in Figure 1.

Defence expenditure as a percentage of GDP

declined from 2.4% in 2011-12 to 2.1% in 2021-22.

The Standing Committee on Defence (2018) had

recommended that the Ministry of Defence should

be allocated a fixed budget of about 3% of GDP to

ensure adequate preparedness of the armed forces.1

India is the 3rd largest military spender

According to the Stockholm International Peace

Research Institute (SIPRI), India was the third-

largest defence spender in absolute terms in 2019

(after USA and China).2 USA spent more than

India on defence, both in absolute terms, and as a

percentage of GDP. China spent lower in terms of

percentage of GDP, but its absolute expenditure on

defence was 3.7 times that of India.

Table 1 compares India’s defence expenditure with

the seven largest spenders in absolute terms and as

a percentage of GDP.

Table 1: International comparison of defence

expenditure (2019)

Country Expenditure

(in USD billion)

Expenditure

(as % of GDP)

USA 731.75 3.4%

China 261.08 1.9%

India 71.13 2.4%

Russia 65.10 3.9%

Saudi Arabia 61.87 8.0%

France 50.12 1.9%

UK 48.65 1.7%

Pakistan 10.26 4.0%

Sources: “SIPRI Military Expenditure Database”, Stockholm

International Peace Research Institute, 2019; PRS.

Actual expenditure has been less than the

projected amount by the defence forces

The expenditure on defence by the three armed

forces has been significantly lower than the amount

projected by the three services, with the shortfall

ranging from 12% to 36%. For instance, in 2015-

16, while the forces projected a required

expenditure of Rs 3,63,270 crore, the actual

expenditure during the year was Rs 2,10,637 crore

(a shortfall of 20%). Figure 2 shows the difference

(shortfall) between the amounts projected by the

three forces and the actual expenditure between

2015-16 and 2019-20. The average shortfall for revenue expenditure was 14% while for capital

expenditure it was 38%. Note that since 2016-17,

0%

4%

8%

12%

16%

20%

0

1,00,000

2,00,000

3,00,000

4,00,000

5,00,000

20

11-1

2

20

12-1

3

20

13-1

4

20

14-1

5

20

15-1

6

20

16-1

7

20

17-1

8

20

18-1

9

20

19-2

0

20

20-2

1

20

21-2

2

Defence expenditure

Defence expenditure % of central governmentexpenditure

Demand for Grants 2021-22 Analysis: Defence PRS Legislative Research

- 16 -

the budget allocation for capital expenditure has

been fully utilised.

Figure 2: Shortfall between amount projected

by the armed forces and actual expenditure

(2015-16 to 2019-20) (in Rs crore)

Note: Calculation for 2019-20 is based on expenditure up to

December 2019.

Sources: 7th Report, Capital Outlay on Defence Services,

Procurement Policy and Defence Planning, Standing Committee

on Defence, March 2020; PRS.

Growth of 3% over Budget 2019-20

The allocation for the Ministry of Defence is

estimated to grow at an annual average rate of 3%

in 2021-22 over 2019-20. This is lower than the

growth in overall central government expenditure

of 14%. Similarly, growth in capital outlay for

defence was 10% in 2021-22 (over 2019-20), while

growth in total capital expenditure of the central

government was 29%. Capital outlay for defence

includes expenditure on construction work,

machinery, and equipment such as tanks, naval

vessels, and aircrafts.

Between 2011-12 and 2021-22, capital outlay for

defence grew at an annual average rate of 7%,

while overall capital expenditure of the central

government grew at 13%. The share of capital

outlay for defence in total government capital

expenditure decreased from 41% to 23% in this

period.

Composition of defence budget

The share of capital outlay has also decreased

within the defence budget. It fell from 30% in

2011-12 to 22% in 2018-19. During this time, the

share of pensions increased from 18% to 26%.

This trend has reversed since 2019-20, as discussed

below.

In 2021-22, expenditure on salaries and pensions

forms the largest portion of the defence budget (Rs

2,58,628 crore, 54% of the defence budget).

Capital outlay of Rs 1,28,150 crore, forms 27% of

the defence budget. The remaining allocation is

towards stores (maintenance of equipment), border

roads, research, and administrative expenses.

Table 2: Defence budget allocation (Rs crore)

Major Head

Actuals 2019-20

RE 2020-21

BE 2021-22

Change (annualised) 2019-20 to

2021-22

Salaries 1,35,771 1,35,787 1,42,778 3%

Capital outlay 1,06,483 1,31,510 1,28,150 10%

Pensions 1,17,810 1,25,000 1,15,850 -1%

Stores 42,907 49,660 44,861 2%

Other expenses 50,026

42,780

46,557 -4%

Total 4,52,996 4,84,736 4,78,196 3%

Note: Salaries, pensions and capital outlay are of the three services.

Salaries include salary for civilians, auxiliary forces, Rashtriya Rifles,

Jammu and Kashmir Light Infantry and Coast Guard. Pensions

include rewards. Capital outlay includes capital expenses on border

roads and coast guard. Stores includes ammunition, repairs and

spares. Others include administration expenses, expense on research

and development and housing. RE is revised estimate and BE is

budget estimate.


Expenditure is estimated to record an annual

average increase of 3% over 2019-20. The increase

is highest for capital outlay, which is expected to

grow at 10%. Allocation for salaries increased by

3% and allocation for pension decreased by 1%.

Share of pensions

Defence pensions provides for pensionary charges

for retired Defence personnel of the three services

(including civilian employees) and employees of

Ordnance Factories. It covers payment of service

pension, gratuity, family and disability pension,

commuted value of pension and leave encashment.

Expenditure on defence pensions has grown at an average annual rate of 12% in the last 10 years.

This is higher than the average annual growth rate

of the defence budget (8.4%). The share of pension

in the defence budget has increased from 18% to

26% (in 2019-20), before declining to 24%.

Figure 3: Expenditure on pensions (2011-12 to

2021-22) (in Rs crore)

Note: Figures for 2020-21 are Revised Estimates and 2021-22

are Budget Estimates. Sources: Union Budget 2011-22; PRS.

-20%-12%

-24% -27%

-38%

-100%

-80%

-60%

-40%

-20%

0%

2015-16 2016-17 2017-18 2018-19 2019-20

Revenue Capital Total

0%

5%

10%

15%

20%

25%

30%

-

30,000

60,000

90,000

1,20,000

1,50,000

20

11-1

2

20

12-1

3

20

13-1

4

20

14-1

5

20

15-1

6

20

16-1

7

20

17-1

8

20

18-1

9

20

19-2

0

20

20-2

1

20

21-2

2

Pension Pensions % of defence expenditure


- 17 -

In 2020-21, the budget estimate for pension (Rs

1.34 lakh crore), was revised down to Rs 1.25 lakh

crore (5% decline). This allocation has been

further reduced for 2021-22 to Rs 1.16 lakh crore.

In November 2015, One Rank One Pension

(OROP) was implemented for armed forces

personnel. This implies that a uniform pension will

be paid for defence personnel retiring at the same

rank, irrespective of their date of retirement. Until

November 2020, Rs 42,740 crore had been

disbursed to 20 lakh pensioners on account of

implementation of OROP.3

The Standing Committee on Defence (2019) noted

that the defence pension liabilities will continue to increase exponentially every year due to increase in

number of retirees, amount of dearness relief,

gratuity, and other retirement benefits.4

The share of funds spent on pensions is bound to

rise since approximately 60,000 personnel retire

every year.5 This reduces the funds available for

modernisation of the armed forces. Some

suggestions to reduce the pension bill include

introducing a different pension scheme or assured

jobs on early retirement.

Share of capital outlay

Capital outlay for defence includes expenditure on

construction work, machinery, and equipment such

as tanks, naval vessels, and aircrafts. Over the last

10 years, the share of the defence budget spent on

capital outlay has declined. The share was highest

during 2011-12 at 30% of the total defence budget, which fell to 22% in 2018-19 (the lowest), and

recovered to 27% (in 2020-21).

Figure 4: Capital outlay as percentage of

defence expenditure (2011-12 to 2021-22) (in Rs

crore)

Note: Figures for 2020-21 are Revised Estimates and 2021-22

are Budget Estimates.

Sources: Union Budgets 2011-2022; PRS.

The share of capital outlay increased from 24% in

2019-20 to 27% in 2020-21 (revised estimates).

Expenditure in 2020-21 of Rs 1,31,510 crore was

also higher than the budget estimates of 2020-21 by

almost Rs 25,000 crore (23% increase). This was

due to additional spending of Rs 20,000 crore on

naval fleet, aircrafts, and other equipment for the

Navy and the Air Force. In 2021-22, capital outlay

has been budgeted at Rs 1,28,150 crore (27% of the

budget of the Ministry).

Committed liabilities

Note that capital acquisition of the armed forces

consists of two components: (i) committed

liabilities, and (ii) new schemes. Committed

liabilities are payments anticipated during a

financial year in respect of contracts concluded in

previous years (as acquisition is a complex process

involving long gestation periods). New schemes include new projects which are at various stages of

approval and are likely to be implemented in

future.

The budget allocation for capital acquisition which

should cover both committed liabilities and new

schemes does not cover all committed liabilities. 6

Inadequate allocation for committed liabilities

could lead to default on contractual obligations.

Table 3: Committed liabilities and

modernisation budget (2016-17 to 2019-20) (in

Rs crore) Year Committed

liabilities Budget

allocation Shortfall

(in %)

2016-17 73,553 62,619 15%

2017-18 91,382 68,965 25%

2018-19 1,10,044 73,883 33%

2019-20 1,13,667 80,959 29%

Sources: 3rd Report, Capital Outlay on Defence Services,


on Defence, December 2019; PRS.

The Standing Committee examining the Demand

for Grants 2020-21 reports that the Ministry did not

supply information regarding committed liabilities

and new schemes separately. Therefore, there is no

information in Table 3 for 2020-21.11

Non-lapsable fund for modernisation

The Report of the 15th Finance Commission for

2021-26 studied the issue of whether a separate

mechanism for funding of defence and internal

security should be set up.7 The Commission

recommended setting up a dedicated, non-lapsable

Modernisation Fund for Defence and Internal

Security to bridge the gap between projected

budgetary requirements and budget allocation.8

The Commission recommended an allocation of Rs

1.5 lakh crore to the Fund over a period of five

years (2021-26) by allocating 1% of the gross

revenue receipts of the central government for this

purpose. The Fund may also contain disinvestment

proceeds of the defence public sector enterprises,

and funds collected through monetisation of surplus

defence land (to be used only for defence

0%

7%

14%

21%

28%

35%

-

30,000

60,000

90,000

1,20,000

1,50,000

20

11-1

2

20

12-1

3

20

13-1

4

20

14-1

5

20

15-1

6

20

16-1

7

20

17-1

8

20

18-1

9

20

19-2

0

20

20-2

1

20

21-2

2

Capital outlay

Capital outlay % of defence expenditure


- 18 -

expenditure). The Commission expects the fund to

collect Rs 2.38 lakh crore over the 2021-26 period.

A similar recommendation to create a Non-

Lapsable Capital Fund Account for defence

modernisation was made by the Standing

Committee on Defence (2017).9 At the time, the

Ministry of Finance had objected to the creation of

such a fund on various grounds. It had held that though the fund is non-lapsable, it would not be

available to the Ministry of Defence automatically,

as it would require Parliament’s sanction.10 The

Finance Minister had maintained that the present

mechanism of authorisation of budget on an annual

basis is working well.11

Analysis of the three-armed forces

This section analyses the budget of the three-armed

forces, as well as issues related to their operational

preparedness and modernisation.

In 2021-22, the total allocation to the three forces

(including pensions) is Rs 4,51,704 crore, 94% of

the total defence budget. The rest of the allocation

is towards research and development and defence

services ordnance factories. 61% of the defence

budget is allocated for the Army, 20% for the Air

Force, and 14% for the Navy. Table 4 details the

defence budget allocation amongst the three forces.

Table 4: Budget of defence services (in Rs crore)

Major Head Actuals 2019-20

Revised 2020-21

Budgeted 2021-22

Share of Budget

Army 2,76,050 2,92,964 2,90,073 61%

Navy 61,819 71,761 67,553 14%

Air Force 87,220 97,559 94,078 20%

Other 27,908 22,452 26,492 6%

Total expenditure

4,52,996 4,84,736 4,78,196 -

Note: Expenditure for Army includes expense on Border Roads

Organisation, and Jammu and Kashmir Light Infantry.

Expenditure for Navy includes expense on Coast Guard

Organisation.


Composition of service budgets

Air Force and Navy are more capital intensive than

the Army. But across all three branches, the ratio

of capital to revenue expenditure is falling, with the

share of pensions and salary increasing.

Army

The Army is the largest of the three forces, both in

terms of its budget as well as the number of

personnel. An amount of Rs 2,90,073 crore has

been allocated for the Army in 2021-22. This

includes Rs 2,11,614 crore for salaries and

pensions which is 73% of the Army’s budget. Note

that as of July 2017, the Army has a sanctioned

strength of 12.6 lakh personnel.12 Significant

expenditure on salaries and pensions, leaves only

11% of the Army’s budget (Rs 30,637 crore) for

modernisation. Table 5 provides the composition

of the Army’s budget for 2021-22.

Compared to the revised estimate for 2020-21, the

allocation for pension has decreased (by Rs 8387

crore) and the allocation for modernisation has

increased (by Rs 4,568 crore) in 2021-22.

Table 5: Composition of Army Budget (2021-22)

(in Rs crore)

Head Amount allocated % of service

budget

Salaries 1,11,693 39%

Pensions 99,921 34%

Modernisation 30,637 11%

Maintenance 20,332 7%

Others 27,490 9%

Total 2,90,073 100%


Note: Salaries include salary for civilians, auxiliary forces,

Rashtriya Rifles, Jammu and Kashmir Light Infantry.

Modernisation funds for the Army is calculated from the

following heads of the capital outlay: (i) Aircraft and

Aeroengine, (ii) Heavy and Medium Vehicles, (iii) Other

Equipment, (iv) Rolling Stock, and (v) Rashtriya Rifles.

Modernisation involves acquisition of state-of-the-

art technologies and weapons systems to upgrade

and augment defence capabilities of the forces.

Figure 5 shows the expenditure on modernisation

of the Army over the last 10 years. Funds for

modernisation of the Army have grown at an

annual average rate of 11% between 2011-12 and

2021-22. In 2021-22, modernisation spending for

the Army is estimated to grow at an annual rate of

15% over 2019-20.

Figure 5: Expenditure on modernisation of

Army (in Rs crore)

Notes: Figures for 2020-21 are Revised Estimates and for 2021-

22 are Budget Estimates.


The Standing Committee on Defence (2018) has noted that modern armed forces should have one-

third of its equipment in the vintage category, one-

third in the current category, and one-third in the

state-of-the-art category.12

However, the current position of the Indian Army

is that 68% of its equipment is in the vintage

category, 24% in the current category, and only 8%

in the state-of-the-art category.10 Further, the

Committee noted that the Indian Army has a

-

10,000

20,000

30,000

40,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 19 -

significant shortage of weapons and ammunition.

According to the Committee, these shortages have

persisted since adequate attention was lacking both

in terms of policy and budget for modernisation.

Such a situation could impact Army preparedness

in the context of a two-front war.12

Navy

The Navy has been allocated Rs 67,553 crore

(including pensions) in 2021-22. Modernisation

comprises 46% (Rs 31,031 crore) of the budget of

the Navy. Table 6 below provides the composition

of the Navy's budget for 2021-22.

Table 6: Composition of Navy Budget (2021-22)

(in Rs crore)

Head Amount allocated % of service budget


Salaries 13,121 19%


Pensions 5,694 8%

Others 10,097 15%

Total 67,553 100%

Note: Salaries include salary for civilians and coast guard.

Modernisation funds for the Navy is calculated from the

following heads of the capital outlay: (i) Aircraft and

Aeroengine, (ii) Heavy and Medium Vehicles, (iii) Other

Equipment, (iv) Joint Staff, (v) Naval Fleet, and (viii) Naval

Dockyards and Projects.


Modernisation spending for the Navy as a

percentage of total defence budget has declined

from 8.7% in 2015-16 to 4.9% in 2018-19. The

Standing Committee on Defence (2018) has stated

that this could lead to a delay in induction of

critical capabilities and resultant cost-overruns.12

Modernisation spending for the Navy has since

recovered to 6.5% in 2021-22. Figure 6 shows the

expenditure on modernisation of the Navy over the

last 10 years. Expenditure on modernisation has

grown at an annual average rate of 5% between 2011-12 and 2021-22. In 2021-22, though

modernisation spending is estimated to grow at an

annual rate of 10% over 2019-20, it is lower than

the spending in 2020-21 (as per the revised

estimates).

Figure 6: Expenditure on modernisation of Navy

(in Rs crore)




Air Force

The Indian Air Force (IAF) has been allocated Rs

94,078 crore for the year 2021-22 (including

pensions for retired personnel). Modernisation

comprises 52% (Rs 48,870 crore) of the total

budget of the IAF.

Table 7: Composition of Air Force Budget

(2021-22) (in Rs Crore)

Head Amount allocated % of service budget


Salaries 17,964 19%

Pensions 10,211 11%


Others 7,605 8%

Total 94,078 100%

Note: Note: Salaries include salary for civilians. Modernisation

funds for the Air Force is calculated from the following heads of

the capital outlay: (i) Aircraft and Aeroengine, (ii) Heavy and

Medium Vehicles, and (iii) Other Equipment.

Source: Union Budget 2021-22; PRS.


of the IAF over the last 10 years. Funds for

modernisation have grown at an annual average

rate of 6% between 2011-12 and 2021-22. In 2021-

22, spending on modernisation is estimated to grow at an annual rate of 8% over 2019-20. The

spending is 6% lower than the revised estimates for

2020-21.

-

10,000

20,000

30,000

40,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 20 -

Figure 7: Expenditure on modernisation of IAF

(in Rs crore)




The CAG has raised issues in relation to the capital

acquisition process of the IAF.13 In its report

(2019), the CAG examined 11 contracts of capital

acquisition signed between 2012-13 and 2017-18,

with a total value of approximately Rs 95,000

crore. It found that the current acquisition system

was unlikely to support the operational

preparedness of the IAF and recommended that the

Ministry of Defence undertake structural reforms of

the entire acquisition process.13

The Estimates Committee (2018) has noted that

there should be 70% serviceability of aircrafts since

aircrafts have to undergo standard maintenance

checks.14 However, as of November 2015, the

serviceability of aircrafts was 60%. Serviceability

measures the number of aircrafts that are mission

capable at a point in time.

Issues in defence procurement

Defence procurement refers to the acquisition of

defence equipment, systems and platforms which is

undertaken by the Ministry of Defence, and the

three armed forces. The Ministry released the

Defence Procurement Procedure (DPP), 2016 in

March 2016 which lays down detailed guidelines

regulating defence procurement in India.15 This

was replaced by the Defence Acquisition Policy,

2020, released in September 2020.16

Procurement of defence hardware is a long process,

involving large number of stakeholders.

Coordination issues between these stakeholders

sometimes results in delays.14 For example, in the

case of procurement of equipment for the air force,

the CAG found that it took three to five years to

just sign the contract, and another three to five

years to complete the delivery.13 There was a need

to remove procedural bottlenecks, simplify

procedures, hasten defence acquisition, and ensure

greater participation from the industry.17

The defence procurement executive is currently in

the Ministry of Defence.18 An Expert Committee

on Defence Procurement (2015) observed that a

procurement organisation needs to have specialised

knowledge of various fields including technology,

commercial negotiations, cost estimations, and

financial structures.18 Therefore, it recommended

the creation of a separate defence procurement

executive, with specialist wings and personnel,

outside the formal structure of the Ministry of

Defence. This executive would spearhead the procurement process, with the Ministry of Defence

and Service Headquarters. Note that countries such

as France and the United Kingdom have

independent agencies responsible for defence

procurement.18

High dependence on imports

According to the Stockholm International Peace

Research Institute, between 2015-19, India was the

second largest importer of major arms, after Saudi

Arabia, accounting for 9% of global imports. 19

The Estimates Committee (2018) had stated that

dependence on foreign suppliers for military

hardware not only results in huge expenditure on

imports, but makes national security vulnerable as

suppliers may not provide weapons during

emergency situations.14 Table 8 notes the total

procurement from foreign and Indian vendors

during 2014-15 to 2019-20. For 2020-21, the

Ministry has targeted domestic procurement of Rs

52,000 crore.20

Table 8: Total procurement from foreign and

Indian vendors (2014-15 to 2019-20) (Rs crore)

Year Total

procurement Foreign vendors

Indian vendors

% Foreign vendors

2014-15 65,860 25,981 39,879 39.4%

2015-16 62,342 23,192 39,150 37.2%

2016-17 69,150 27,278 41,872 39.4%

2017-18 72,732 29,035 43,697 39.9%

2018-19 75,921 36,957 38,964 48.7%

2019-20* 67,287 31,058 36,228 46.2%

Note: *Data for 2019-20 is up to December 31, 2019.

Sources: 7th Report, Capital Outlay on Defence Services,


on Defence, March 2020; PRS.

The Estimates Committee (2018) has observed that

the indigenisation level in the defence sector is

increasing at a very slow rate. It further stated that nothing concrete has been done for the

implementation of the strategic partnership model,

which envisaged a key role for private players in

building platforms such as submarines and fighter

jets in India.14 The Committee also noted the high

dependence on external content by Defence Public

Sector Undertakings (DPSUs). For example, the

import content for platforms manufactured by

Hindustan Aeronautics Limited (in terms of value

of the platform), ranged between 40% to 60%.14

-

10,000

20,000

30,000

40,000

50,000

60,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 21 -

Indigenisation and growth of the defence sector

Import embargo

In August 2020, the Ministry of Defence published

a list of 101 items for which there will be an

embargo (ban) on import.20 The list includes

weapon systems, such as artillery guns, and anti-

submarine rocket launchers, and equipment such as

high-power radar and upgrade systems. The ban on

each item will apply as per the deadline specified.

For 67 items, the ban came into effect from

December 2020. The Ministry expects the ban on

imports to give a push to self-reliance in the

defence sector by boosting the domestic industry.

It estimates that the embargo will result in domestic contracts of nearly four lakh crore rupees within the

next five to seven years. Between April 2015 and

August 2020, Rs 3.5 lakh crore worth of these

items was procured.20

Draft Defence Production and Export Promotion Policy

In August 2020, the Ministry released the Draft Defence Production and Export Promotion Policy to boost the defence production capabilities, reduce dependence on imports, and promote exports for self-reliance in the defence industry.21

The domestic defence industry (including aerospace and naval shipbuilding) is currently estimated to be about Rs 80,000 crore. The Policy aims to achieve a turnover of Rs 1.75 lakh crore in aerospace and defence goods and services by 2025 (including exports of Rs 35,000 crore).

Currently, the procurement from the domestic industry is nearly Rs 70,000 crore (60% of overall defence procurement). The Policy aims to double this to Rs 1,40,000 crore by 2025. It proposes creating a distinct head for domestic capital procurement in the defence budget, and increasing allocation for domestic capital procurement by a minimum of 15% per year for the next five years.

Defence Acquisition Procedure, 2020

The Defence Acquisition Procedure (DAP) governs

the acquisition of weapons and equipment for

India’s defence forces.16 The DPP 2016 specified

two modes of capital acquisition: (i) buy, and (ii)

buy and make. The DAP has introduced ‘leasing’

as a new mode of acquisition. Leasing substitutes

initial capital outlays with periodical rental payments. It is preferred in situations where: (i)

procurement is not feasible due to time constraint,

or (ii) the asset is required only for a specific time.

‘Make’ refers to manufacturing portion of the

contract. Other key features of the DAP are

discussed below.

Increase in indigenous content

Table 9 shows the categories of capital acquisition

in the DPP 2016 and DAP for the Buy, and Buy

and Make modes. The DAP has enhanced the

indigenous content (IC) requirement in various

categories of procurement. IC is the percent of cost

of indigenous content in base contract cost.

Categories of acquisition provided in DAP are: (i)

Buy (Indian-IDDM) refers to the procurement of

products from an Indian vendor that have been

indigenously designed, developed and

manufactured; (ii) Buy (Indian) refers to the

procurement of products from an Indian vendor;

(iii) Buy and Make (Indian) refers to an initial

procurement of equipment from an Indian vendor

in a tie-up with a foreign vendor, followed by

indigenous production involving transfer of

technology; (iv) Buy (Global-Manufacture in India)

refers to a purchase from a foreign vendor where

the 50% IC value can be achieved in ‘Make’

through an Indian subsidiary of the vendor; and (v)

Buy (Global) refers to outright purchase of

equipment from foreign or Indian vendors.

Table 9: Indigenous content requirement for

different categories of acquisition Category DPP-2016 DAP-2020

Buy (Indian-IDDM) 40% or more 50% or more

Buy (Indian) 40% or more 50% or more (for indigenous design)

Buy and Make (Indian)

50% or more of ‘Make’ part

50% or more of ‘Make’ part

Buy and Make Not specified Category not present

Buy (Global-Manufacture in India)

Category not present

50% or more

Buy (Global) Not specified 30% or more (for Indian vendor)

Note: Buy and Make category refers to an initial procurement of

equipment from a foreign vendor, followed by transfer of

technology.

Sources: DPP-2016, DAP-2020; PRS.

Procurement from DRDO, DPSUs

The DAP adds a separate mechanism for

acquisition of systems designed by the Defence

Research and Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs), and

Ordnance Factory Boards (OFBs). Based on

operational requirements, the procuring agency will

identify equipment which can be designed and

developed by DRDO, DPSUs, or OFBs. Such

cases would then be categorised under Buy (Indian-

IDDM) for subsequent procurement. This is

expected to enhance domestic development

capabilities.

Changes to acquisition procedure

The acquisition process starts with a request for

information and formulation of requirements before

the project is cleared. Thereafter, contractors

submit bids which are evaluated and field tested

(trials) before the contract is awarded. The DAP

seeks to: (i) formulate service quality requirements

using verifiable parameters, in a standardised

format, and (ii) provide for single stage clearance


- 22 -

for acquisitions of up to Rs 500 crore. The DAP

will also rationalise trial and testing procedures to

ensure transparency and avoid duplication of trials.

Project Management Unit

A Project Management Unit (PMU) has been

mandated to support contract management. It was

announced as part of the Aatmanirbhar Bharat

reforms.22 The PMU will facilitate provision of

consultancy support during the acquisition process.

This is expected to ensure a time bound

procurement process and enable faster decision

making.

11 “40th Report: Demands for Grants (2018-19) General Defence

Budget, Border Roads Organisation, Indian Coast Guard,

Military Engineer Services, Directorate General Defence

Estates, Defence Public Sector Undertakings, Welfare of Ex-

Servicemen, Defence Pensions, Ex-Servicemen Contributory

Health Scheme”, Standing Committee on Defence, Lok Sabha,

March 12, 2018,

http://164.100.47.193/lsscommittee/Defence/16_Defence_40.pdf 2 “SIPRI Military Expenditure Database”, Stockholm

International Peace Research Institute,

https://www.sipri.org/sites/default/files/Data%20for%20all%20c

ountries%20from%201988%E2%80%932018%20as%20a%20s

hare%20of%20GDP%20%28pdf%29.pdf. 3 “Five years of historic decision to implement OROP”, Press

Information Bureau, Ministry of Defence, November 6, 2020. 4 "1st Report: Demands for Grants (2019-20) General Defence





Health Scheme", Standing Committee on Defence, December

2019,

http://164.100.47.193/lsscommittee/Defence/17_Defence_1.pdf. 5 "46th Report: Demands for Grants (2018-19) General Defence





Health Scheme", Standing Committee on Defence, January

2019,

http://164.100.47.193/lsscommittee/Defence/16_Defence_46.pdf 6 3rd Report, Capital Outlay on Defence Services, Procurement

Policy and Defence Planning, Standing Committee on Defence,

December 2019,

http://164.100.47.193/lsscommittee/Defence/17_Defence_3.pdf. 7 Notification S.O. 2691(E), Ministry of Finance, July 29, 2019,

http://finance.cg.gov.in/15%20Finance%20Commission/GoI%2

0Notification/29-07-2019.pdf. 8 Chapter 11, Report of the 15th Finance Commission for 2021-

26,

https://fincomindia.nic.in/WriteReadData/html_en_files/fincom1

5/Reports/XVFC%20VOL%20I%20Main%20Report.pdf. 9 “32nd Report: Creation of Non-Lapsable Capital Fund Account,

Instead of the Present System”, Standing Committee on

Defence, Lok Sabha, August 4, 2017,

http://164.100.47.193/lsscommittee/Defence/16_Defence_32.pdf 10 “48th Report: Action Taken by the Government on the

Observations/Recommendations contained in the Fortieth

Report (16th Lok Sabha) on ‘Demands for Grants of the year

2018-19 on Capital Outlay on Defence Services, Procurement

Policy and Defence Planning”, Standing Committee on Defence,

Lok Sabha, January 7, 2019,

http://164.100.47.193/lsscommittee/Defence/16_Defence_48.pdf 11 7th Report, Capital Outlay on Defence Services, Procurement

Policy and Defence Planning, Standing Committee on Defence,

Increase in FDI limit

In September 2020, the limit for foreign direct investment under the automatic route was increased

from 49% to 74%.23 FDI beyond 74% is permitted

with government approval which may be given

where FDI is likely to result in access to modern

technology.24 Domestic companies can benefit

from enhanced access to capital and state of the art

technology. This change was announced as part of

the Aatmanirbhar Bharat Abhiyaan.22

March 2020,

http://164.100.47.193/lsscommittee/Defence/17_Defence_7.pdf. 12 “41st Report: Demands for Grants (2018-19) Army, Navy, Air

Force”, Standing Committee on Defence, March 12, 2018,

http://164.100.47.193/lsscommittee/Defence/16_Defence_41.pdf 13 “Report No. 3 of 2019: Performance Audit Report of the

Comptroller and Auditor General of Indian on Capital

Acquisition in Indian Air Force”, Comptroller and Auditor

General, February 13, 2019. 14 “29th Report: Preparedness of Armed Forces- Defence

Production and Procurement”, Committee on Estimates, July 25,

2018,

http://164.100.47.193/lsscommittee/Estimates/16_Estimates_29.

pdf. 15 Defence Procurement Procedure 2016, Ministry of Defence,

March 28, 2016,

https://mod.gov.in/dod/sites/default/files/Updatedver230818.pdf 16 Defence Acquisition Policy, 2020, Ministry of Finance,

September 28, 2020,

https://www.mod.gov.in/dod/sites/default/files/DAP2030new.pd

f. 17 "Raksha Mantri Shri Rajnath Singh approves a Committee to

review Defence Procurement Procedure to strengthen ‘Make in

India’", Press Information Bureau, Ministry of Defence, August

17, 2019. 18 “Committee of Experts for Amendments to DPP 2013

Including Formulation of Policy Framework”, Ministry of

Defence, July 2015,

https://mod.gov.in/sites/default/files/Reportddp.pdf. 19 SIPRI Yearbook 2020, Armaments, Disarmament and

International Security,

https://www.sipri.org/sites/default/files/2020-

06/yb20_summary_en_v2.pdf. 20 “MoD's big push to Atmanirbhar Bharat initiative; Import

embargo on 101 items beyond given timelines to boost

indigenisation of defence production”, Press Information

Bureau, Ministry of Defence, August 9, 2020. 21 Draft Defence Production and Export Promotion Policy

(DPEPP), 2020,

https://www.makeinindiadefence.gov.in/admin/webroot/writerea

ddata/upload/recentactivity/Draft_DPEPP_03.08.2020.pdf. 22 “Presentation of details of 4th Tranche announced by Union

Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman

under Aatmanirbhar Bharat Abhiyaan to support Indian

economy in fight against COVID-19”, May 16, 2020,

https://static.pib.gov.in/WriteReadData/userfiles/AatmaNirbhar

%20Bharat%20Full%20Presentation%20Part%204%2016-5-

2020.pdf. 23 Press Note No. 4 (2020 Series), Ministry of Commerce and

Industry, https://dipp.gov.in/sites/default/files/pn4-2020_0.PDF. 24 “FDI in Defence Sector”, Press Information Bureau, Ministry

of Defence, September 14, 2020.

http://164.100.47.193/lsscommittee/Defence/16_Defence_40.pdf

https://www.sipri.org/sites/default/files/Data%20for%20all%20countries%20from%201988%E2%80%932018%20as%20a%20share%20of%20GDP%20%28pdf%29.pdf






http://finance.cg.gov.in/15%20Finance%20Commission/GoI%20Notification/29-07-2019.pdf

http://finance.cg.gov.in/15%20Finance%20Commission/GoI%20Notification/29-07-2019.pdf

https://fincomindia.nic.in/WriteReadData/html_en_files/fincom15/Reports/XVFC%20VOL%20I%20Main%20Report.pdf

https://fincomindia.nic.in/WriteReadData/html_en_files/fincom15/Reports/XVFC%20VOL%20I%20Main%20Report.pdf





http://164.100.47.193/lsscommittee/Estimates/16_Estimates_29.pdf


https://mod.gov.in/dod/sites/default/files/Updatedver230818.pdf

https://www.mod.gov.in/dod/sites/default/files/DAP2030new.pdf

https://www.mod.gov.in/dod/sites/default/files/DAP2030new.pdf

https://mod.gov.in/sites/default/files/Reportddp.pdf

https://www.sipri.org/sites/default/files/2020-06/yb20_summary_en_v2.pdf

https://www.sipri.org/sites/default/files/2020-06/yb20_summary_en_v2.pdf

https://www.makeinindiadefence.gov.in/admin/webroot/writereaddata/upload/recentactivity/Draft_DPEPP_03.08.2020.pdf

https://www.makeinindiadefence.gov.in/admin/webroot/writereaddata/upload/recentactivity/Draft_DPEPP_03.08.2020.pdf

https://static.pib.gov.in/WriteReadData/userfiles/AatmaNirbhar%20Bharat%20Full%20Presentation%20Part%204%2016-5-2020.pdf



https://dipp.gov.in/sites/default/files/pn4-2020_0.PDF

- 23 -

Demand for Grants: Food and Public

Distribution

The Ministry of Consumer Affairs, Food and Public

Distribution has two Departments: (i) Food and

Public Distribution, and (ii) Consumer Affairs.

Allocation to the Ministry accounts for 7% of the

budget of the central government in 2021-22.1

Department of Consumer Affairs is responsible

for spreading awareness among consumers about

their rights, protecting their interests, implementing

standards, and preventing black marketing.2 In

2021-22, the Department has been allocated Rs

2,974 crore, a 24% annual increase over 2019-20.3

Department of Food and Public Distribution is

responsible for ensuring food security through procurement, storage, and distribution of foodgrains,

and for regulating the sugar sector.4 In 2021-22, the

Department has been allocated Rs 2,42,836 crore

(99% of the Ministry’s allocation).5 This is an

annual increase of 48% over 2019-20 expenditure.

Table 1: Allocation to the Ministry (in Rs crore)

Department 2019-20 Actuals

2020-21 Revised

2021-22 Budgeted

% change (annualised)

in 2021-22 over 2019-20

Food & Public Distribution

1,15,173 4,38,649 2,53,974 48%

Consumer Affairs

1,923 12,038 2,974 24%

Total 1,17,096 4,50,687 2,56,948 48%


This note examines the allocation to the Department

of Food and Public Distribution. It also discusses

the broad issues in the sector and key observations

and recommendations made in this regard.

Overview of Finances

Food subsidy is the largest expenditure by the

Department of Food and Public Distribution. 96%

of the Department’s allocation in 2021-22 is towards

food subsidy (see Table 10 in the Annexure for

more details). The subsidy is provided to the Food

Corporation of India (FCI) and states for procuring

foodgrains from farmers at government notified

prices and selling them at lower subsidised prices

(known as Central Issue Prices), under the National

Food Security Act, 2013. The Act mandates

coverage of 75% of the population in rural areas and

50% in urban areas, and covers 81 crore persons.6,7

The subsidy also covers the storage cost incurred by

FCI in maintaining buffer stocks in order to ensure

food security in the country. Table 2 shows the

expenditure on food subsidy during 2011-21.

Table 2: Expenditure on food subsidy (Rs crore)

Year Allocation Expenditure % utilisation

2011-12 60,573 72,822 120%

2012-13 75,000 85,000 113%

2013-14 90,000 92,000 102%

2014-15 1,15,000 1,17,671 102%

2015-16 1,24,419 1,39,419 112%

2016-17 1,34,835 1,10,173 82%

2017-18 1,45,339 1,00,282 69%

2018-19 1,69,323 1,01,327 60%

2019-20 1,84,220 1,08,688 59%

2020-21 1,15,570 4,22,618# 366%

2021-22 2,42,836* - -

Note: *Budget estimate; #Revised estimate.

Sources: Expenditure Budget, Union Budgets (2011-21); PRS.

The Department was allocated Rs 1,84,220 crore for

food subsidy in 2019-20. However, only 59% of the allocation was utilised as the food subsidy provided

to FCI decreased from Rs 1,51,000 crore (budget

estimate) to Rs 75,000 crore. As directed by the

Ministry of Finance, the Department deferred the

payment of food subsidy due to FCI, resulting in an

underspending of Rs 76,000 crore.8 Due to such

deferment, more so since 2016-17, the food subsidy

paid to FCI has been much lower than the amount

allocated in the budget for this purpose. As a result,

the food subsidy payment due to FCI increased over

the years, from Rs 50,037 crore at the end of 2015-

16 to Rs 2,43,779 crore at the end of 2019-20.9

In the meanwhile, the government provided loans to

FCI from the National Small Savings Fund (NSSF)

to meet its operational requirements. NSSF loans

worth Rs 2,54,600 crore were outstanding with FCI

at the end of 2019-20.10 In her 2021-22 budget

speech, the Finance Minister announced that the

government will discontinue the NSSF loans given

to FCI and accordingly make budget provisions in

2020-21 and 2021-22.11 It estimates the NSSF loans

outstanding with FCI to reduce to Rs 63,712 crore

by the end of 2021-22.12 Thus, the government has

significantly increased the allocation for food

subsidy to FCI to clear its dues, which in turn will

be used by FCI to repay the NSSF loans. In 2020-

21, the allocation has increased from Rs 77,983

crore (budget estimate) to Rs 3,44,077 crore (revised

estimate). In 2021-22, Rs 2,02,616 crore has been

allocated, a 64% annual increase over 2019-20.

Note that the increase seen in allocation in 2020-21

is also on account of the additional expenditure

incurred by FCI in providing free foodgrains to poor

Demand for Grants 2021-22 Analysis: Food and Public Distribution PRS Legislative Research

- 24 -

under the Pradhan Mantri Garib Kalyan Anna

Yojana (PMGKAY).13 The scheme was announced

in March 2020 as a part of the COVID-19 relief

package for the poor. Under the scheme, five kg of

wheat or rice and one kg of pulses were provided for

free every month to persons from poor families

during the period April-November 2020. All

beneficiaries under the National Food Security Act, 2013 were eligible for these benefits in addition to

their existing foodgrain entitlements.

The cost of providing free foodgrains under the

scheme PMGKAY was borne by the Department in

2020, which is estimated to be nearly Rs 1,34,030

crore.14 This expenditure was in the form of: (i)

food subsidy to FCI, (ii) food subsidy to states, and

(iii) assistance to states for intra-state movement of

foodgrains and margin of fair price shop dealers.

In May 2020, the government extended the benefits

provided under PMGKAY to migrants (who were

not eligible for the benefits otherwise) for a period

of two months in 2020 under the Aatmanirbhar

Bharat Economic Package.15 This scheme’s cost for

the Department is estimated to be Rs 989 crore.16

Components of food subsidy

Expenditure on food subsidy can be classified under

the following three heads (break-up in Table 3):

▪ Subsidy to FCI: The Food Corporation of

India (FCI) receives subsidy for procuring

foodgrains from farmers at government notified

prices and selling them at lower subsidised

prices. It also receives subsidy for the storage

cost incurred in maintaining buffer stocks.

▪ Subsidy to states: Under the decentralised

procurement scheme, states may choose to

undertake the operations of procurement,

storage, and distribution on behalf of FCI, for

which they are provided with subsidy.

▪ Sugar subsidy: Sugar subsidy is provided for

giving one kg of sugar per month at subsidised

rates to families covered under the Antyodaya

Anna Yojana (i.e., poorest of the poor families).

In 2021-22, subsidy to FCI and states form 83% and

16% of the allocation for food subsidy, respectively.

Table 3: Break-up of food subsidy (in Rs crore)

Subsidy 2019-20 Actuals

2020-21 Revised

2021-22 Budgeted


in 2021-22 over 2019-20

Subsidy to FCI 75,000 3,44,077 2,02,616 64%

Subsidy to states (decentralised procurement)

33,508 78,338 40,000 9%

Sugar subsidy 180 203 220 11%

Total 1,08,688 4,22,618 2,42,836 49%


Issues in the Sector

FCI and state agencies procure foodgrains from farmers at the government notified Minimum

Support Prices (MSPs). These foodgrains are

provided to the economically weaker sections at

subsidised prices through fair price shops under the

Public Distribution System (PDS). The central and

state governments provide subsidised foodgrains to

beneficiaries under the National Food Security Act,

2013 as well as certain other welfare schemes such

as the Mid-Day Meal scheme. In this section, we

examine some issues relating to the: (i) pending

dues of FCI, (ii) provision of food subsidy, (iii)

PDS, and (iv) sugarcane dues to farmers.

Pending dues of FCI

The central government provides food subsidy to

FCI as reimbursement of the loss it incurs in its

procurement, storage, and distribution operations.

During the period 2016-20, although the Department

used to receive sufficient allocation for payment to

FCI, due to budget cuts made during the year, the

actual amount paid to FCI was much lower. The

CAG (2019) observed that when the food subsidy

budget is not sufficient to clear FCI’s dues, such

dues are carried over to the next year.17 Due to such carryovers every year, payment due to FCI for food

subsidy increased from Rs 50,037 crore at the end of

2015-16 to Rs 2.44 lakh crore at the end of 2019-20.

In 2020-21, the allocation for food subsidy to FCI

has been increased by 359% over 2019-20 to Rs

3.44 lakh crore (revised estimate). In comparison,

the subsidy cost incurred by FCI in 2020-21 has also

increased significantly due to the additional benefits

provided under the COVID-19 relief packages. The

cost incurred by FCI in 2020-21 is estimated to be

Rs 2.19 lakh crore, 65% higher over 2019-20. Thus,

there is a surplus allocation of Rs 1.25 lakh crore in 2020-21 for clearing the dues of FCI. This would

reduce FCI’s outstanding dues from Rs 2.44 lakh

crore to Rs 1.19 lakh crore by the end of 2020-21.

Figure 1: Food subsidy dues of FCI outstanding

at the end of the year during 2013-21 (Rs crore)

Sources: Food Corporation of India; PRS.

In 2021-22, Rs 2.03 lakh crore has been allocated

for food subsidy to FCI. Assuming that the subsidy

cost incurred by FCI in 2021-22 is the same as that

in 2019-20 (Rs 1.33 lakh crore), this allocation

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21


- 25 -

would further reduce the outstanding subsidy dues

of FCI to Rs 48,703 crore by the end of 2021-22.

Due to the delay in clearing dues by the Department,

FCI borrows money for its operational requirements.

When FCI uses such borrowings to fill the resource

gap, the Department has to provide additional funds

in subsequent years for payment of interest on these

borrowings. The CAG observed that the central

government has adopted this off-budget method of

financing the subsidy dues, thereby deferring the

payment to FCI.17 This understates a particular

fiscal year’s expenditure by keeping deferred

expenditure off-budget for that year, and prevents

transparent depiction of fiscal indicators. For

instance, if the central government had cleared all

the subsidy dues of FCI in the year 2019-20 itself,

its fiscal deficit (borrowings) for 2019-20 would

have increased from 4.6% of GDP to 5.8% of GDP.

Provision of food subsidy

The Targeted Public Distribution System (TPDS),

through which foodgrains are distributed at

subsidised prices, seeks to provide food security to

people below the poverty line. Over the years, the

spending on food subsidy has increased and the ratio

of people below the poverty line has decreased from

54.9% in 1973-74 to 21.9% in 2011-12 (Table 4).

Table 4: Poverty ratio and no. of poor persons

Year Poverty ratio (in %) No. of Poor (in crore)

1973-74 54.9% 32.1

1977-78 51.3% 32.9

1983-84 44.5% 32.3

1987-88 38.9% 30.7

1993-94 36.0% 32.0

2004-05 27.5% 30.2

2011-12 21.9% 26.9

Note: Figures from 1973-74 to 2004-05 have been computed

using the Lakdawala methodology, and figures for 2011-12 have

been computed using the Tendulkar methodology.

Sources: Planning Commission; PRS.

The proportion of undernourished persons reduced

from 18.6% in 2000-02 to 14% in 2017-19 (Table

5). However, due to population growth, the number

of undernourished persons has not reduced much

(from 20 crore in 2000-02 to 18.9 crore in 2017-19).

Table 5: Undernourishment in India (2000-2019)

Year Proportion of population

undernourished (in %)

Number of undernourished

persons (in crore)

2000-02 18.6% 20.0

2003-05 22.2% 25.1

2008-10 16.4% 20.0

2013-15 15.3% 19.8

2017-19 14% 18.9

Sources: Food and Agriculture Organisation, 2020; PRS.

Nutritional balance: The National Food Security

Act, 2013 guarantees five kg of foodgrains per

person per month to entitled beneficiaries at

subsidised prices. Further, Antyodaya Anna Yojana

households, which constitute the poorest of the poor,

are entitled to 35 kg per household per month at

subsidised prices. Presently, the food items

provided by the central government for distribution

under PDS are mainly rice, wheat, and sugar.18

As shown in Figure 2 and Figure 3, there has been a

change in the pattern of nutritional intake among

people in both rural and urban areas (details given in

Table 6 and Table 7 in the Annexure).

Although cereals or foodgrains contain only 10% protein, their share as a percentage of the total

protein intake has been over 50% in both rural and

urban areas.19 However, other food items such as

meat and pulses contain more than 20% protein but

contribute to only 15% of the total protein intake.

Figure 2: Protein intake (%) in rural areas

Sources: Nutritional Intake in India (2011-12), NSSO; PRS.

Figure 3: Protein intake (%) in urban areas

Sources: Nutritional Intake in India (2011-12), NSSO; PRS.

The share of cereals in calorie intake has reduced by

10% in rural areas and 7% in urban areas, whereas

that of milk, eggs, fish, and meat has increased (see

Table 12 in the Annexure). This indicates a reduced

preference for rice and wheat, and an increase in

preference towards other protein-rich food items.

The National Food Security Act, 2013 requires the

central and state governments to undertake steps to

diversify commodities distributed under PDS.20

69%

10% 9%4%

8%

62%

11% 11%5%

12%

0%

30%

60%

90%

Cereals Pulses Milk Egg, fish &meat

Others

1993-94 2011-12

59%

11% 12%5% 12%

54%

12% 14%6%

14%

0%

30%

60%

90%

Cereals Pulses Milk Egg, fish &meat

Others

1993-94 2011-12


- 26 -

Imbalance in farm production: MSP is the assured

price announced by the central government at which

foodgrains are procured from farmers by the central

and state governments and their agencies, for the

central pool of foodgrains. The central pool is used

for providing foodgrains under PDS and other

welfare schemes, and also kept as reserve in the

form of buffer stock. While MSPs are annually announced for 23 crops, public procurement is

limited to a few crops such as paddy (rice), wheat,

and, to a limited extent, pulses (Figure 4).

The Economic Survey 2019-20 observed that the

regular increase in MSP is seen by farmers as a

signal to opt for crops which have an assured

procurement system (for example, rice and wheat).21

Thus, MSP incentivises farmers to grow crops

which are procured by the government. As wheat

and rice are major foodgrains provided under the

PDS, the focus of procurement is on these crops.

This skews the production of crops in favour of wheat and paddy (particularly in states where

procurement levels are high), and does not offer an

incentive for farmers to produce other items such as

pulses.22 Further, this puts pressure on the water

table as these crops are water-intensive (also

applicable to sugarcane which has assured purchase

by private sugar mills).23 Note that the National

Food Security Act, 2013 requires the central and

state governments to undertake steps to diversify

commodities distributed under PDS.

Figure 4: Percentage of crop production procured at MSP in crop year 2019-20

Sources: Unstarred Question No. 331, Lok Sabha, September 15,

2020; PRS.

The procurement of foodgrains is largely

concentrated in a few states. Three states (Madhya

Pradesh, Punjab, and Haryana) producing 46% of

the wheat in the country account for 85% of its

procurement. Six states (Punjab, Telangana, Andhra

Pradesh, Chhattisgarh, Odisha, and Haryana) with

40% of the production of rice have 74% share in

procurement. The National Food Security Act, 2013

requires the central, state, and local governments to

strive to progressively realise certain objectives for

advancing food and nutritional security. One of

these objectives involves geographical

diversification of the procurement operations.

Figure 5: 85% wheat procurement is from three

states (2019-20)

Sources: Department of Food and Public Distribution; PRS.

Figure 6: 76% of the rice procured comes from

six states (2019-20)


As procurement of wheat and paddy is done at MSP

(which is often above market prices), their stocks

have grown over the years. At the end of 2019-20,

the stock of these foodgrains was 19% more than the

offtake in that year (see Table 10 in the Annexure).

Revision of central issue price (CIP)

Under the National Food Security Act, 2013, food

subsidy is given to beneficiaries at the CIP, which

was last revised in 2002. Table 13 shows the CIP

for wheat and rice for various beneficiaries.

Table 6: Central Issue Price (Rs per kg)

Foodgrain AAY BPL APL

Rice 3.00 5.65 7.95

Wheat 2.00 4.15 6.10

Note: AAY – Antyodaya Anna Yojana, BPL – Below Poverty

Line, APL – Above Poverty Line.


In comparison to the CIP, the economic cost (including procurement, stocking, distribution) for

wheat is Rs 30 per kg and for rice is Rs 43 per kg as

of February 2021.9 Food subsidy is calculated as

the difference between the economic cost of

procuring foodgrains, and their CIP. While the

economic cost for rice has increased from Rs 11 per

kg in 2001-02 to Rs 43 per kg in 2021-22 (Figure 7),

and of wheat from Rs 9 per kg to Rs 30 per kg over

the same period (Figure 8), their CIPs have not been

revised. This has led to an increasing gap between

43%

36%

12%

1%

0%

10%

20%

30%

40%

50%

Rice Wheat Pulses Coarse grains

33% 33%

19%15%

0%

10%

20%

30%

40%

MP PB HR Others

21%

15%

11% 10% 9% 8%

26%

0%

5%

10%

15%

20%

25%

30%

PB TS AP CG OD HR Others


- 27 -

the economic cost and CIP, leading to an increase in

expenditure on food subsidy.

Figure 7: Subsidy on a kg of wheat (in Rs)


Figure 8: Subsidy on a kg of rice (in Rs)


The Standing Committee on Food, Consumer

Affairs and Public Distribution (2016-17) noted that

the reasons for increase in food subsidy include: (i)

increase in the procurement cost of foodgrains, (ii)

non-revision of the Central Issue Prices since 2002,

and (iii) implementation of the National Food

Security Act, 2013 in all states.24 In 2018-19, the

Ministry had stated that increasing the CIP could be

one of the measures to bridge the gap between the

funds it requires, and the funds it is finally allocated.

Delivery of food subsidy

Leakages in PDS: Leakages refer to foodgrains not

reaching the intended beneficiaries. Note that recent

data on leakage is not publicly available. The latest

available data is for 2011. According to the 2011

data, leakages in PDS were estimated to be 46.7%

(see Table 12 in the Annexure).25,26

Leakages may be of three types: (i) pilferage or

damage during transportation of foodgrains, (ii)

diversion to non-beneficiaries at fair price shops

through issue of ghost cards, and (iii) exclusion of

people entitled to foodgrains but who are not on the

beneficiary list.27,28 Studies have shown that

targeting mechanisms such as TPDS are prone to

large exclusion and inclusion errors.29

Exclusion errors occur when entitled beneficiaries

do not get foodgrains. It refers to the percentage of

poor households that are entitled to but do not have

PDS cards. Exclusion errors had declined from 55%

in 2004-05 to 41% in 2011-12 (Figure 9).

Inclusion errors occur when those that are

ineligible get undue benefits. Inclusion errors had

increased from 29% in 2004-05 to 37% in 2011-12.

Declining exclusion errors and increasing inclusion

errors are due to two reasons. First, increase in the

coverage of TPDS has reduced the proportion of

poor who do not have access to PDS cards. Second,

despite a decline in poverty rate, non-poor are still

identified as poor by the government thus allowing

them to continue using their PDS cards.30

Note that under the National Food Security Act,

2013, states are responsible for the identification of

beneficiaries. In 2016, the Comptroller and Auditor

General of India (CAG) found that this process had

not been completed by the states, and 49% of the

beneficiaries were yet to be identified by states.31

Figure 9: Inclusion and exclusion errors (%)

Sources: Evaluation study on the role of PDS in shaping

households and nutritional security in India, NITI Aayog,

December 2016; PRS.

Alternative subsidy systems: Over the years,

several solutions have been suggested to plug

leakages, including: (i) Direct Benefit Transfer

(DBT) in lieu of food subsidy, and (ii) end-to-end

computerisation of the PDS operations.25

The National Food Security Act, 2013 requires the

central and state governments to progressively

reform TPDS by taking various measures, including

introduction of schemes such as cash transfer or

food coupon.20 Various experts and bodies have

also suggested replacing TPDS with a DBT

system.32,33 Advantages and disadvantages of these

two methods of delivering benefits have been

discussed below.

▪ TPDS: TPDS assures beneficiaries that they

would receive foodgrains, and insulates them

against inflation and price volatility. Further,

foodgrains are delivered through fair price

shops in villages, which are easy to access.34,35

0

10

20

30

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10

2011

-12

2013

-14

2015

-16

2017

-18

2019

-20

2021

-22

Economic Cost CIP

Subsidy

0

10

20

30

40

50

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10

2011

-12

2013

-14

2015

-16

2017

-18

2019

-20

2021

-22

Economic Cost CIP

Subsidy

29%

55%

37%41%

0%

20%

40%

60%

Inclusion errors Exclusion errors

2004-05 2011-12


- 28 -

However, high leakages have been witnessed in

the system, both during transportation and

distribution. These include pilferage and errors

of inclusion and exclusion from the beneficiary

list. In addition, it has also been argued that the

distribution of only wheat and rice may cause

an imbalance in the nutritional intake of

beneficiaries.20 Beneficiaries have also reported receiving poor quality foodgrains

under TPDS.

▪ DBT: DBT or cash transfers seek to increase

the choices available with a beneficiary, and

provide direct financial assistance. It has been

argued that the costs of DBT may be lesser than

TPDS, owing to lesser costs incurred on

transportation and storage of foodgrains.36,37

On the other hand, it has been argued that the

cash received through DBT may be spent on

non-food items. Further, such a system may

expose beneficiaries to inflation. In this regard,

one may need to consider the low penetration

and access to banking in rural areas.38

In 2015, the Department released two notifications:

the Cash Transfer of Food Subsidy Rules and the

Food Security (Assistance to State Governments) Rules.39,40 As per these notifications, the central

government offers two choices to states and union

territories for reforming their respective PDS

machinery: (i) replacing the existing TPDS with a

DBT system, or (ii) Fair Price Shop automation,

which involves installation of Point of Sale devices,

for authentication of the beneficiaries and electronic

capturing of transactions. As of January 2021, the

DBT system is under implementation in the union

territories of Chandigarh and Puducherry.41

As of February 2021, 4.94 lakh (91%) Fair Price

Shops have been automated across the country.42 Details regarding the status of computerisation of

PDS are given in Table 14 in the Annexure.

Table 7: Illustration: subsidy given on rice (2015)

1. CIP Rs 3 per kg

2. MSP Rs 20 per kg

3. Subsidy (3=2-1) Rs 17 per kg

4. Cost to government (Subsidy + Costs on procurement, storage, and distribution)

Rs 27 per kg

5. Cash subsidy to beneficiaries Rs 22 per kg

6. Government saving (6=4-5) Rs 5 per kg

7. Increase in beneficiary benefit (7=5-3) Rs 5 per kg

Sources: High-Level Committee Report on Restructuring of FCI,

January 2015; PRS.

The High-Level Committee on Restructuring of FCI

(2015) had suggested that switching to DBT for

food subsidy would reduce the food subsidy bill of

the government by more than Rs 30,000 crore.25

While making this recommendation, the Committee

illustrated this by taking the case of subsidy given

on rice (Table 8). It assumed that the government

would transfer Rs 22 for per kg rice to a beneficiary.

Aadhaar: The High-Level Committee (2015) had

also recommended the introduction of biometric

authentication and Aadhaar to plug leakages in PDS.

Such transfers could be linked to Jan Dhan account,

and be indexed to inflation.25 As of February 2021,

128.3 crore Aadhaar cards have been generated.43

In February 2017, the Ministry made it mandatory

for beneficiaries under the National Food Security

Act, 2013 to use Aadhaar as proof of identification

for receiving foodgrains (deadline for linking

Aadhaar with ration cards extended to March 31,

2021).44,45 This aims to facilitate the removal of bogus ration cards, check leakages, and ensure

better delivery of foodgrains.25,46,47

Note that beneficiaries may face issues with

Aadhaar authentication while availing PDS benefits.

According to the data submitted by UIDAI to the

Supreme Court in Justice K. S. Puttaswamy vs

Union of India, the Aadhaar authentication failure

rate (across all purposes) was 8.5% for iris scans

and 6% for fingerprints.48 In its judgement, the

Court held that services cannot be denied to

beneficiaries due to Aadhaar authentication failure.

As of March 2020, while 100% ration cards had

been digitised, the seeding of these cards with

Aadhaar was at 90%.49 As of February 12, 2021,

more than 70% of the transactions on Point of Sale

devices are done using biometric authentication.42

Further, between 2013 and 2020, nearly 4.4 crore

ration cards were deleted due to detection of bogus,

ghost, and duplicate cards during Aadhaar seeding.42

Current challenges in PDS

Storage: The Department allocates funds for the

construction of godowns and silos to increase the

storage capacity of FCI and state agencies. In 2021-

22, Rs 60 crore has been allocated for this purpose,

whereas this was Rs 63 crore in 2019-20 and Rs 44

crore in 2020-21 (revised estimate).

As of December 31, 2020, the total storage capacity

in the country was 819 lakh tonnes, against 530 lakh

tonnes of foodgrain stock.50 Of the total capacity,

699 lakh tonnes was covered storage and 150 lakh

tonnes (18%) was CAP (cover and plinth) storage.

In 2021-22, out of the Rs 60 crore allocation for

creation of storage capacity, Rs 45 crore has been

allocated for the north-eastern region. The Standing Committee on Food, Consumer Affairs and Public

Distribution (2020) noted that FCI could not achieve

the targets set for construction of godowns in 2019-

20.49 In the north-eastern region, against the target

of 25,000 tonnes of storage, only 10% of the target

was achieved. In other states, no new godown was

constructed, whereas the target was 2,240 tonnes.


- 29 -

The Committee observed that FCI faces various

issues in construction of godowns in the north-

eastern region such as difficult terrain, frequent

bandhs, and difficulty in acquisition of land. The

Committee recommended that the Department

should coordinate with the state governments to

resolve these issues. It further recommended that a

roadmap should be chalked out by the government

for creating mini-godowns across the country.

In 2016, the CAG observed that, until 2014, the

foodgrain stock in the central pool was higher than

the FCI’s storage capacity (Figure 2).31 It noted that

in 2015, the foodgrain stock in the central pool

became lower than the storage capacity due to an

increase in decentralised procurement by states.

Figure 2: Stock and capacity of FCI (in lakh

tonnes)

Sources: CAG; PRS.

Under the decentralised procurement system, the

state governments and their agencies undertake

procurement, storage, and distribution of foodgrains

on behalf of FCI. The expenditure incurred by them

is reimbursed by the central government in the form

of food subsidy. The Standing Committee (2020) observed that the decentralised procurement system

reduces FCI’s handling and transportation cost and

increases the efficiency of procurement.49 As of

March 2020, 17 states had adopted the decentralised

procurement system. The Committee recommended

that more states should be encouraged to adopt the

decentralised procurement system.49 FCI should

create necessary infrastructure for procurement of

foodgrains in coordination with state governments.

Fair Price Shops: Fair Price Shops are licensed

ration shops which provide foodgrains and kerosene under the public distribution system. They may also

sell certain other goods in some states. It has been

observed by various experts and the Ministry that

the margins on which the Fair Price Shops operate

are low.51 Further, in the absence of economic

viability, there may be cases where the dealer resorts

to unfair practices. In order to make these shops

viable, some states have taken steps such as:

▪ Chhattisgarh provided interest-free seed capital

of Rs 75,000 to each fair price shop for 20

years. It also increased the commission on

foodgrains from Rs 8/ quintal to Rs 30/ quintal.

▪ States such as Assam and Delhi have permitted

the sale of non-PDS items at these fair price

shops. Such items include oil, potatoes, onion,

tea, and mobile recharge coupons.

Sugarcane dues

The Department is also responsible for formulation

of policies and regulations for the sugar sector. In

2021-22, Rs 4,337 crore has been allocated for

providing assistance to sugar mills through various

measures, an annual increase of 10% over 2019-20

(Table 8). These measures include: (i) direct

assistance to mills for clearing the sugarcane dues of

farmers, (ii) reimbursing the mills for maintaining

buffer stock, (iii) facilitating export of sugar, and

(iv) improving their ethanol production capacity.

Table 8: Assistance to sugar mills (in Rs crore)

2019-20 Actuals

2020-21 Revised

2021-22 Budgeted

% change

(annualised) in 2021-22

over 2019-20

For facilitating export of sugar

551 350 2,000 91%

Direct assistance for clearing dues

2,155 5,073 1,200 -25%

For maintaining buffer stock

530 650 650 11%

For ethanol production

50 150 300 145%

Other measures 310 594 187 -22%

Total 3,595 6,818 4,337 10%


The assistance is being provided with the aim of

improving the liquidity of sugar mills in order to

facilitate payment of sugarcane dues of farmers.52,53

Note that as of January 31, 2021, payment of Rs

19,260 crore is pending with sugar mills as dues for

2019-20 and previous years.54 State-wise details of

the dues are given in Table 16 in the Annexure.

These sugarcane dues accumulate due to delay in payments to farmers for their produce. In years of

surplus production, the sugar prices fall impacting

the sale of sugar and liquidity of mills.55 As a result,

mills are unable to pay farmers leading to delay in

payments and accumulation of dues. Note that

sugar mills are obligated to purchase sugarcane from

all farmers within their specified area at a price

fixed by the government. Conversely, farmers are

bound to sell to the respective mills.

Rationalisation of sugarcane pricing has been

recommended as one of the steps for improving the

efficiency of the sugar industry. The central government fixes the Fair and Remunerative Price

(FRP) for sugarcane, which is the minimum price

that must be paid by sugar mills to farmers.56 The

FRP is fixed based on the recommendations of the

Commission for Agricultural Costs and Prices

(CACP). It is recommended taking into

415 426

518 479

405

332

288 316 336 377 369 357

0

100

200

300

400

500

600

2010 2011 2012 2013 2014 2015

Foodgrains Storage Capacity


- 30 -

consideration: (i) the cost of production, (ii) rate of

recovery of sugar, (iii) availability of sugar to

consumers at a fair price, (iv) returns to farmers

from alternative crops and the general trend of

prices of agricultural commodities, (v) realisation

from sale of by-products, and (vi) reasonable

margins for farmers on account of risks and profits.

State governments can also intervene in sugarcane

pricing by announcing a State Advised Price (SAP).

SAPs are usually much higher than the FRP. This

creates a distortion in the industry as SAP is neither

1 Ministry-wise Summary of Budget Provisions, Union Budget

2021-22, https://www.indiabudget.gov.in/doc/eb/sumsbe.pdf. 2 About DCA, Department of Consumer Affairs,

https://consumeraffairs.nic.in/about-us/about-dca. 3 Department of Consumer Affairs, Expenditure Budget, Union

Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe14.pdf. 4 Introduction, Department of Food and Public Distribution,

https://dfpd.gov.in/index.htm. 5 Department of Food and Public Distribution, Expenditure

Budget, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe15.pdf. 6 The National Food Security Act, 2013, Ministry of Consumer

Affairs, Food and Public Distribution,

http://www.egazette.nic.in/WriteReadData/2013/E_29_2013_429

.pdf. 7 Lok Sabha Unstarred Question No. 1192, Ministry of Consumer

Affairs, Food and Public Distribution, February 9, 2021,

http://164.100.24.220/loksabhaquestions/annex/175/AU1192.pdf. 8 Lok Sabha Unstarred Question No. 47, Ministry of Consumer


http://164.100.24.220/loksabhaquestions/annex/175/AU47.pdf. 9 Subsidy Position of FCI, Food Corporation of India, as of

February 13, 2021, https://fci.gov.in/finances.php?view=109. 10 Statement of Extra Budgetary Resources, Expenditure Profile,

Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/stat27.pdf. 11 Budget Speech, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 12 National Small Savings Fund, Receipt Budget, Union Budget

2021-22, https://www.indiabudget.gov.in/doc/rec/annex11.pdf. 13 “Finance Minister announces Rs 1.70 Lakh Crore relief

package under Pradhan Mantri Garib Kalyan Yojana for the poor

to help them fight the battle against Corona Virus”, Press

Information Bureau, Ministry of Finance, March 26, 2020. 14 “Estimated cost for distribution of foodgrains and pulses under

Pradhan Mantri Garib Kalyan Ann Yojana during April –

November 2020 is around Rs 1,48,938 crore”, Press Information

Bureau, Ministry of Consumer Affairs, Food and Public

Distribution, July 1, 2020. 15 “Cabinet approves AtmaNirbhar Bharat Package for allocation

of foodgrains to the migrants / stranded migrants”, Press

Information Bureau, Cabinet, May 20, 2020. 16 Agriculture and Food Management, Chapter 7, Volume II,

Economic Survey 2020-21, January 2021,

https://www.indiabudget.gov.in/economicsurvey/doc/vol2chapter

/echap07_vol2.pdf. 17 Report no. 20 of 2018: ‘Compliance of the Fiscal

Responsibility and Budget Management Act, 2003 for the year

2016-17’, Comptroller and Auditor General of India, January

2019,

https://www.cag.gov.in/sites/default/files/audit_report_files/Repo

rt_No_20_of_2018_Compliance_of_the_Fiscal_Responsibility_a

nd_Budget_Management_Act_2003_Department_of_Economic_

Affairs_Minis.pdf.

linked to sugar recovery nor it takes into account

domestic and global prices and other relevant

parameters. As a result, when sugar prices are low,

mill owners are unable to pay farmers resulting in

delayed payment and accumulation of dues. The

CACP (2018) recommended that the FRP must be

implemented in all states and the announcement of

SAP by states should be stopped immediately.56 In case state governments decide to continue with

SAP, the difference between SAP and FRP should

be paid by the state governments directly to farmers.

18 Public Distribution System, Department of Food and Public

Distribution, https://dfpd.gov.in/public-distribution.htm. 19 “Nutritional Intake in India 2011-12, NSS 68th Round, National

Sample Survey Office, Ministry of Statistics and Programme

Implementation, October 2014,

http://mospi.nic.in/sites/default/files/publication_reports/nss_repo

rt_560_19dec14.pdf. 20 The National Food Security Act, 2013, Ministry of Consumer

Affairs, Food and Public Distribution,


.pdf. 21 Chapter 4, Volume I, Economic Survey 2019-20, January 2020,

https://www.indiabudget.gov.in/budget2020-

21/economicsurvey/doc/vol1chapter/echap04_vol1.pdf. 22 Prices, Agriculture and Food Management, Chapter 5, Volume

II, Economic Survey 2015-16, January 2016,

http://unionbudget.nic.in/budget2016-2017/es2015-16/echapvol2-

05.pdf. 23 Agriculture and Food Management, Chapter 7, Volume II,

Economic Survey 2018-19, January 2019,


20/economicsurvey/doc/vol2chapter/echap07_vol2.pdf. 24 Report no. 15, Standing Committee on Food, Consumer Affairs

and Public Distribution: ‘Demands for Grants (2017-18),

Department of Food and Public Distribution’, Lok Sabha, March

2017,

http://164.100.47.193/lsscommittee/Food,%20Consumer%20Affa

irs%20&%20Public%20Distribution/16_Food_Consumer_Affair

s_And_Public_Distribution_15.pdf. 25 Report of the High Level Committee on Reorienting the Role

and Restructuring of Food Corporation of India, January 2015,

http://www.fci.gov.in/app2/webroot/upload/News/Report%20of

%20the%20High%20Level%20Committee%20on%20Reorientin

g%20the%20Role%20and%20Restructuring%20of%20FCI_Engl

ish_1.pdf. 26 Third Report of the Standing Committee on Food, Consumer

Affairs and Public Distribution: Demands for Grants 2015-16,

Department of Food and Public Distribution,



s_And_Public_Distribution_3.pdf. 27 The Case for Direct Cash Transfers to the Poor, Economic and

Political Weekly, April 2008,

http://www.epw.in/system/files/pdf/2008_43/15/The_Case_for_D

irect_Cash_Transfers_to_the_Poor.pdf. 28 Performance Evaluation of Targeted Public Distribution

System, Planning Commission of India, March 2005,

http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.

pdf. 29 Report of the Expert Group to advise the Ministry of Rural

Development in the methodology for conducting the Below

Poverty Line (BPL) Census for 11th Five Year Plan, August 2009,

http://rural.nic.in/sites/downloads/circular/ReportofExpertGroup

Chaired-Dr.N.C.Saxena.pdf. 30 Evaluation Study on the Role of Public Distribution System in

shaping household and nutritional security in India, NITI Aayog,

December 2016,

https://www.indiabudget.gov.in/doc/eb/sumsbe.pdf

https://consumeraffairs.nic.in/about-us/about-dca

https://www.indiabudget.gov.in/doc/eb/sbe14.pdf

https://dfpd.gov.in/index.htm


http://www.egazette.nic.in/WriteReadData/2013/E_29_2013_429.pdf


http://164.100.24.220/loksabhaquestions/annex/175/AU1192.pdf


https://fci.gov.in/finances.php?view=109

https://www.indiabudget.gov.in/doc/eb/stat27.pdf

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf

https://www.indiabudget.gov.in/doc/rec/annex11.pdf

https://www.indiabudget.gov.in/economicsurvey/doc/vol2chapter/echap07_vol2.pdf


https://www.cag.gov.in/sites/default/files/audit_report_files/Report_No_20_of_2018_Compliance_of_the_Fiscal_Responsibility_and_Budget_Management_Act_2003_Department_of_Economic_Affairs_Minis.pdf




https://dfpd.gov.in/public-distribution.htm

http://mospi.nic.in/sites/default/files/publication_reports/nss_report_560_19dec14.pdf

http://mospi.nic.in/sites/default/files/publication_reports/nss_report_560_19dec14.pdf



https://www.indiabudget.gov.in/budget2020-21/economicsurvey/doc/vol1chapter/echap04_vol1.pdf


http://unionbudget.nic.in/budget2016-2017/es2015-16/echapvol2-05.pdf




http://164.100.47.193/lsscommittee/Food,%20Consumer%20Affairs%20&%20Public%20Distribution/16_Food_Consumer_Affairs_And_Public_Distribution_15.pdf



http://www.fci.gov.in/app2/webroot/upload/News/Report%20of%20the%20High%20Level%20Committee%20on%20Reorienting%20the%20Role%20and%20Restructuring%20of%20FCI_English_1.pdf







http://www.epw.in/system/files/pdf/2008_43/15/The_Case_for_Direct_Cash_Transfers_to_the_Poor.pdf


http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf

http://planningcommission.nic.in/reports/peoreport/peo/peo_tpds.pdf

http://rural.nic.in/sites/downloads/circular/ReportofExpertGroupChaired-Dr.N.C.Saxena.pdf

http://rural.nic.in/sites/downloads/circular/ReportofExpertGroupChaired-Dr.N.C.Saxena.pdf


- 31 -

http://niti.gov.in/writereaddata/files/document_publication/Final

%20PDS%20Report-new.pdf. 31 Report no. 54 of 2015: ‘Audit on the Preparedness for

Implementation of National Food Security Act, 2013 for the year

ended March, 2015’, Comptroller and Auditor General of India,

April 2016,

https://cag.gov.in/uploads/download_audit_report/2016/Union_C

ivil_National_Food_Security_Report_54_of_2015.pdf. 32 Prices, Agriculture and Food Management, Chapter 5, Volume

I, Economic Survey 2015-16, January 2016,

http://unionbudget.nic.in/budget2016-2017/es2015-16/echapvol2-

05.pdf. 33 Working Paper 294, “Leakages from Public Distribution

System”, January 2015, ICRIER,

http://icrier.org/pdf/Working_Paper_294.pdf. 34 Revival of the Public Distribution System: Evidence and

Explanations, The Economic and Political Weekly, November 5,

2011, http://www.epw.in/system/files/pdf/2011_46/44-

45/Revival_of_the_Public_Distribution_System_Evidence_and_

Explanations.pdf. 35 The Case for Direct Cash Transfers to the Poor, Economic and



irect_Cash_Transfers_to_the_Poor.pdf. 36 Revival of the Public Distribution System: Evidence and

Explanations, The Economic and Political Weekly, November 5,

2011,

http://www.epw.in/system/files/pdf/2011_46/44-

45/Revival_of_the_Publ

ic_Distribution_System_Evidence_and_Explanations.pdf. 37 The Case for Direct Cash Transfers to the Poor, Economic and



irect_Cash_Transfers_to_the_Poor.pdf. 38 Report of the Internal Working Group on Branch Authorisation

Policy, Reserve Bank of India, September 2016,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/IWG99F1

2F147B6E4F8DBEE8CEBB8F09F103.PDF. 39 The Cash Transfer of Food Subsidy Rules, 2015, Ministry of

Consumer Affairs, Food and Public Distribution, September 3,

2015,

http://dfpd.nic.in/writereaddata/Portal/News/32_1_cash.pdf. 40 The Food Security (Assistance to States) Rules, 2015, Ministry

of Consumer Affairs, Food and Public Distribution, August 17,

2015,

http://dfpd.nic.in/fgAvAHcAcgBpAHQAZQByAGUAYQBkAG

QAYQB0AGEALwBQAG8AcgB0AGEAbAAvAE0AYQBnAG

EAegBpAG4AZQAvAEQAbwBjAHUAbQBlAG4AdAAvAA==

/1_135_1_Food-Security.pdf. 41 Foodgrain Bulletin, Department of Food and Public

Distribution, January 2021,

https://dfpd.gov.in/writereaddata/Portal/Magazine/FoodgrainBull

etinforJanuary2021Bilingual.pdf.

42 Rajya Sabha Unstarred Question No. 1358, Ministry of

Consumer Affairs, Food and Public Distribution, February 12,

2021, https://pqars.nic.in/annex/253/AU1358.pdf. 43 Aadhaar Dashboard, Unique Identification Authority of India,

as of February 18, 2021, https://uidai.gov.in/aadhaar_dashboard/. 44 S.O. 371 (E), Gazette of India, Ministry of Consumer Affairs,

Food and Public Distribution, February 8, 2017,

http://egazette.nic.in/WriteReadData/2017/174131.pdf. 45 Rajya Sabha Unstarred Question No. 1370, Ministry of


2021, https://pqars.nic.in/annex/253/AU1370.pdf. 46 Lok Sabha Unstarred Question No. 844, Ministry of Consumer


http://164.100.47.190/loksabhaquestions/annex/11/AU844.pdf. 47 “Envisioning a role for Aadhaar in the Public Distribution

System”, Unique Identification Authority of India, Planning

Commission, June 2010,

http://uidai.gov.in/UID_PDF/Working_Papers/Circulated_Aadha

ar_PDS_Note.pdf. 48 Justice K. S. Puttaswamy (Retd.) and Anr. vs Union of India

and Ors., W. P. (C.) No. 494 of 2012. 49 Report no. 3, Standing Committee on Food, Consumer Affairs

and Public Distribution: ‘Demand for Grants (2020-21),

Department of Food and Public Distribution’, Lok Sabha, March

2020,



s_And_Public_Distribution_3.pdf. 50 Lok Sabha Unstarred Question No. 1343, Ministry of


2021,

http://164.100.24.220/loksabhaquestions/annex/175/AU1343.pdf. 51 Newsletter of the Department of Food and Public Distribution,

Jan-March, 2015,

http://dfpd.nic.in/writereaddata/images/pdf/Final_English_versio

n_of_newsletter_May_29_2015.pdf. 52“Cabinet approves comprehensive policy to deal with excess

sugar production in the country”, Press Information Bureau,

Cabinet Committee on Economic Affairs, September 26, 2018. 53 “Cabinet approves soft loan to sugar mills to facilitate payment

of cane dues of the farmers for the current sugar season”, Press

Information Bureau, Cabinet Committee on Economic Affairs,

February 28, 2019. 54 Lok Sabha Starred Question No. 113, Ministry of Consumer


http://164.100.24.220/loksabhaquestions/annex/175/AS113.pdf. 55 Report of the Committee on the Regulation of Sugar Sector in

India: The Way Forward, October 2012,

http://eac.gov.in/reports/rep_sugar1210.pdf. 56 Report on Price Policy for Sugarcane, 2019-20 season,

Commission for Agricultural Costs and Prices, Ministry of

Agriculture and Farmers’ Welfare, August 2017,

https://cacp.dacnet.nic.in/ViewReports.aspx?Input=2&PageId=41

&KeyId=622.

http://niti.gov.in/writereaddata/files/document_publication/Final%20PDS%20Report-new.pdf

http://niti.gov.in/writereaddata/files/document_publication/Final%20PDS%20Report-new.pdf

https://cag.gov.in/uploads/download_audit_report/2016/Union_Civil_National_Food_Security_Report_54_of_2015.pdf

https://cag.gov.in/uploads/download_audit_report/2016/Union_Civil_National_Food_Security_Report_54_of_2015.pdf



http://icrier.org/pdf/Working_Paper_294.pdf

http://www.epw.in/system/files/pdf/2011_46/44-45/Revival_of_the_Public_Distribution_System_Evidence_and_Explanations.pdf





http://www.epw.in/system/files/pdf/2011_46/44-45/Revival_of_the_Publ%20ic_Distribution_System_Evidence_and_Explanations.pdf





https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/IWG99F12F147B6E4F8DBEE8CEBB8F09F103.PDF

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/IWG99F12F147B6E4F8DBEE8CEBB8F09F103.PDF

http://dfpd.nic.in/writereaddata/Portal/News/32_1_cash.pdf

http://dfpd.nic.in/fgAvAHcAcgBpAHQAZQByAGUAYQBkAGQAYQB0AGEALwBQAG8AcgB0AGEAbAAvAE0AYQBnAGEAegBpAG4AZQAvAEQAbwBjAHUAbQBlAG4AdAAvAA==/1_135_1_Food-Security.pdf




https://dfpd.gov.in/writereaddata/Portal/Magazine/FoodgrainBulletinforJanuary2021Bilingual.pdf

https://dfpd.gov.in/writereaddata/Portal/Magazine/FoodgrainBulletinforJanuary2021Bilingual.pdf

https://pqars.nic.in/annex/253/AU1358.pdf

https://uidai.gov.in/aadhaar_dashboard/

http://egazette.nic.in/WriteReadData/2017/174131.pdf



http://uidai.gov.in/UID_PDF/Working_Papers/Circulated_Aadhaar_PDS_Note.pdf

http://uidai.gov.in/UID_PDF/Working_Papers/Circulated_Aadhaar_PDS_Note.pdf





http://dfpd.nic.in/writereaddata/images/pdf/Final_English_version_of_newsletter_May_29_2015.pdf

http://dfpd.nic.in/writereaddata/images/pdf/Final_English_version_of_newsletter_May_29_2015.pdf

http://164.100.24.220/loksabhaquestions/annex/175/AS113.pdf

http://eac.gov.in/reports/rep_sugar1210.pdf

https://cacp.dacnet.nic.in/ViewReports.aspx?Input=2&PageId=41&KeyId=622

https://cacp.dacnet.nic.in/ViewReports.aspx?Input=2&PageId=41&KeyId=622


- 32 -

Annexure

Table 9: Allocation to major heads of expenditure under the Department in 2021-22 (Rs crore)

2019-20 Actuals

2020-21 Budgeted

2020-21 Revised

2021-22 Budgeted

% change (annualised) in 2021-22 over

2019-20

Food subsidy 1,08,688 1,15,570 4,22,618 2,42,836 49%

Subsidy to Food Corporation of India (FCI) 75,000 77,983 3,44,077 2,02,616 64%

Subsidy to states (decentralised procurement) 33,508 37,337 78,338 40,000 9%

Sugar subsidy payable under PDS 180 250 203 220 11%

Assistance to state agencies for intra-state movement of foodgrains and for margin of fair price shops’ dealers

1,679 3,983 8,000 4,000 54%

Investment in equity capital of FCI 1,000 1,000 1,000 2,500 58%

Scheme for defraying expenditure on transport and marketing of sugar exports, including handling and processing

551 200 350 2,000 91%

Assistance to sugar mills for the seasons 2017-18 to 2019-20 2,155 700 5,073 1,200 -25%

Scheme for creation and maintenance of buffer stock of sugar 530 200 650 650 11%

Financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity

50 50 150 300 145%

Schemes for development of sugar industries 210 172 176 187 -6%

Scheme for extending soft loan to sugar mills 100 120 418 - -

Department 1,15,173 1,22,235 4,38,649 2,53,974 48%

Sources: Demand no. 15, Department of Food and Public Distribution, Expenditure Budget, Union Budget 2021-22; PRS.

Table 10: Share of calorie intake from different food groups (%)

Cereals Pulses, nuts,

& oilseeds Vegetables &

fruits Meats,

eggs, & fish Milk & milk products

Miscellaneous

Rural

1993-94 71.0 4.9 2.0 0.7 6.2 15.2

1999-00 67.6 5.5 2.0 0.8 6.2 17.9

2004-05 67.5 5.0 2.2 0.8 6.4 18.1

2009-10 64.2 4.5 1.8 0.7 6.8 22.0

2011-12 61.1 5.2 1.9 0.8 7.1 23.9

Urban

1993-94 58.5 6.1 3.3 1.0 8.0 23.1

1999-00 55.1 6.9 2.9 1.1 8.2 25.8

2004-05 56.1 6.7 3.2 1.1 8.6 24.3

2009-10 55.0 5.9 2.6 1.0 9.4 26.1

2011-12 51.6 6.4 2.6 1.1 9.1 29.2

Sources: Table T18, Nutritional Intake in India, 2011-12, NSSO; PRS.

Table 11: Share of protein intake (%)

Sources: Table T21, Nutritional Intake in India, 2011-12, NSSO; PRS.

Year Cereals Pulses Milk and milk products Egg, fish, and meat Other food

Rural

1993-94 69.4 9.8 8.8 3.7 8.4

1999-00 67.4 10.9 9.2 4.0 8.4

2004-05 66.4 9.5 9.3 4.0 10.8

2009-10 64.9 9.1 10.0 4.0 12.0

2011-12 62.5 10.6 10.6 4.7 11.7

Urban

1993-94 59.4 11.5 11.7 5.3 12.1

1999-00 57.0 13.1 12.4 6.0 11.5

2004-05 56.2 11.0 12.3 5.5 15.0

2009-10 56.4 11.3 13.8 5.6 13.0

2011-12 53.7 12.4 13.6 6.4 13.9


- 33 -

Table 12: Leakages in PDS for wheat and rice (in lakh tonnes)

State/ UT Total consumption from PDS Offtake (2011-12) Leakage % Leakage

Andhra Pradesh 36.1 40.7 4.6 11.3%

Arunachal Pradesh 0.8 1.0 0.2 20.0%

Assam 9.5 24.4 14.9 61.1%

Bihar 11.3 36.2 24.9 68.8%

Chhattisgarh 16.7 16.7 0.0 0.0%

Goa 0.4 0.8 0.4 50.0%

Gujarat 4.4 15.7 11.3 72.0%

Haryana 2.2 7.3 5.1 69.9%

Himachal Pradesh 4.9 6.3 1.4 22.2%

Jammu and Kashmir 8.8 9.1 0.3 3.3%

Jharkhand 3.1 12.4 9.3 75.0%

Karnataka 16.2 30.1 13.9 46.2%

Kerala 11.4 20.1 8.7 43.3%

Madhya Pradesh 15.5 30.7 15.2 49.5%

Maharashtra 19.3 42.7 23.4 54.8%

Manipur 0.0 2.0 2.0 100.0%

Meghalaya 0.8 2.5 1.7 68.0%

Mizoram 0.9 1.1 0.2 18.2%

Nagaland 0.1 2.0 1.9 95.0%

Odisha 15.4 24.4 9.0 36.9%

Punjab 3.4 8.7 5.3 60.9%

Rajasthan 10.1 29.8 19.7 66.1%

Sikkim N/A N/A - -

Tamil Nadu 39.5 45 5.5 12.2%

Tripura 2.7 3.3 0.6 18.2%

Uttar Pradesh 43.2 82.9 39.7 47.9%

Uttarakhand 4.6 6.6 2.0 30.3%

West Bengal 13.4 43.9 30.5 69.5%

Total 295.5 554.5 259 46.7%

Note: Data from National Sample Survey 2011-12. Sources: Table 1, Working Paper 294, “Leakages from Public Distribution System”,

ICRIER, January 2015; PRS.

Table 13: Procurement, offtake, and stocks of foodgrains (in million tonnes)

Year Procurement Offtake

% Offtake Stocks

Rice Wheat Total Rice Wheat Total Rice Wheat Total

2004-05 24.7 16.8 41.5 23.2 18.3 41.5 100% 13.3 4.1 18

2005-06 27.6 14.8 42.4 25.1 17.2 42.3 100% 13.7 2 16.6

2006-07 25.1 9.2 34.3 25.1 11.7 36.8 107% 13.2 4.7 17.9

2007-08 28.7 11.1 39.8 25.2 12.2 37.4 94% 13.8 5.8 19.8

2008-09 34.1 22.7 56.8 24.6 14.9 39.5 70% 21.6 13.4 35.6

2009-10 32 25.4 57.4 27.4 22.4 49.8 87% 26.7 16.1 43.3

2010-11 34.2 22.5 56.7 29.9 23.1 53 93% 28.8 15.4 44.3

2011-12 35 28.3 63.3 32.1 24.3 56.4 89% 33.4 20 53.4

2012-13 34 38.2 72.2 32.6 33.2 65.8 91% 35.5 24.2 59.8

2013-14 31.9 25.1 57 29.2 30.6 59.8 105% 30.6 17.8 49.5

2014-15 31.6 28 59.6 30.7 25.2 55.9 94% 23.8 17.2 41.3

2015-16 34.1 28.1 62.2 31.8 31.8 63.6 102% 28.8 14.5 43.6

2016-17 36.5 23.6 60.1 32.8 29.1 61.9 103% 29.8 8.1 38.1

2017-18 37.6 30.6 68.2 35 25.3 60.3 88% 30 13.2 43.3

2018-19 42.7 35 77.7 34.4 31.5 65.9 85% 37.7 34.9 72.7

2019-20 46.1 34.1 80.2 35 27.2 62.2 78% 49.2 24.7 74

Sources: Database on Indian Economy, Reserve Bank of India, as of February 18, 2021; PRS.


- 34 -

Table 14: Status of end-to-end computerisation of PDS operations (March 2020)

State/ UT Digitisation of Ration Cards

Aadhaar Seeding with Ration Cards

Online Allocation of Foodgrains

Computerisation of Supply Chain

% of Fair Price Shops with

Operational ePoS

Andhra Pradesh 100% 100% Implemented Implemented 100%

Arunachal Pradesh 100% 57% Implemented - 1%

Assam 100% 0% Implemented Implemented 0%

Bihar 100% 76% Implemented Implemented 96%

Chhattisgarh 100% 98% Implemented Implemented 97%

Goa 100% 98% Implemented Implemented 100%

Gujarat 100% 100% Implemented Implemented 100%

Haryana 100% 100% Implemented Implemented 100%

Himachal Pradesh 100% 100% Implemented Implemented 100%

Jharkhand 100% 95% Implemented Implemented 100%

Karnataka 100% 100% Implemented Implemented 99%

Kerala 100% 100% Implemented Implemented 100%

Madhya Pradesh 100% 90% Implemented Implemented 100%

Maharashtra 100% 99% Implemented Implemented 100%

Manipur 100% 82% Implemented - 12%

Meghalaya 100% 0% Implemented Implemented 0%

Mizoram 100% 93% Implemented - 0%

Nagaland 100% 70% Implemented - 23%

Odisha 100% 99% Implemented Implemented 100%

Punjab 100% 100% Implemented Implemented 100%

Rajasthan 100% 97% Implemented Implemented 100%

Sikkim 100% 91% Implemented Implemented 99%

Tamil Nadu 100% 100% Implemented Implemented 100%

Telangana 100% 99% Implemented Implemented 100%

Tripura 100% 100% Implemented Implemented 100%

Uttar Pradesh 100% 100% Implemented Implemented 100%

Uttarakhand 100% 94% Implemented Implemented 65%

West Bengal 100% 80% Implemented Implemented 92%

Andaman and Nicobar Islands

100% 98% Implemented Implemented 96%

Chandigarh 100% 99% Direct Benefit Direct Benefit NA

Dadra and Nagar Haveli 100% 100% Implemented Implemented 100%

Daman and Diu 100% 100% Implemented Implemented 100%

Delhi 100% 100% Implemented Implemented 0%

Jammu and Kashmir (including Ladakh)

100% 84% Implemented - 100%

Lakshadweep 100% 100% Implemented NA 100%

Puducherry 100% 100% Direct Benefit Direct Benefit NA

Total 100% 90% 34 28 89%

Sources: Report no. 3, Standing Committee on Food, Consumer Affairs and Public Distribution, Lok Sabha, March 13, 2020; PRS.


- 35 -

Table 15: Minimum Support Prices for paddy and wheat during 2011-21 (in Rs/quintal)

Year Paddy (common) % increase over last year Wheat % increase over last year

2011-12 1,080 8.0% 1,285 14.7%

2012-13 1,250 15.7% 1,350 5.1%

2013-14 1,310 4.8% 1,400 3.7%

2014-15 1,360 3.8% 1,450 3.6%

2015-16 1,410 3.7% 1,525 5.2%

2016-17 1,470 4.3% 1,625 6.6%

2017-18 1,550 5.4% 1,735 6.8%

2018-19 1,750 12.9% 1,840 6.1%

2019-20 1,815 3.7% 1,925 4.6%

2020-21 1,868 2.9% 1,975 2.6%

Sources: Commission for Agricultural Costs and Prices, Ministry of Agriculture and Farmers’ Welfare; PRS.

Table 16: Sugarcane dues as of January 31, 2021 (Rs crore)

State 2017-18 2018-19 2019-20 2020-21 Total Arrears

Andhra Pradesh - 37 44 91 171

Bihar 0 58 85 411 554

Chhattisgarh 2 6 - 55 63

Goa - 2 - - 2

Gujarat 2 - 0 1,044 1,046

Haryana - - 4 670 674

Karnataka - 11 49 3,585 3,645

Madhya Pradesh - - - 257 257

Maharashtra 27 118 0 2,030 2,176

Odisha - - - 22 22

Punjab - - 137 576 713

Tamil Nadu 61 74 30 56 221

Telangana - - 12 114 126

Uttar Pradesh 34 - 1,406 7,555 8,995

Uttarakhand 75 105 - 416 596

Total 200 410 1,766 16,883 19,260

Sources: Lok Sabha Starred Question No. 113, February 9, 2021; PRS.

- 36 -

Demand for Grants: Railways

The Railways finances were presented on February

1, 2021, by the Finance Minister Ms. Nirmala

Sitharaman along with the Union Budget 2021-22.

The Ministry of Railways manages the

administration of Indian Railways and policy

formation through the Railway Board. Indian Railways is a commercial undertaking of the

central government.1

Expenditure of Railways is financed through: (i) its

internal resources (freight and passenger revenue,

and leasing of railway land), (ii) budgetary support

from the central government, and (iii) extra-

budgetary resources (primarily borrowings but also

includes institutional financing, public-private

partnerships, and foreign direct investment).

Railways’ working expenses (salaries, staff

amenities, pension, asset maintenance) are met

through its internal resources. Capital expenditure (such as procurement of wagons, station

redevelopment) is financed through extra-

budgetary resources, the budgetary support from

the central government, and internal resources.

This note looks at the proposed expenditure of the

Ministry of Railways for the year 2021-22, its

finances over the last few years, and issues with the

same.

Highlights

▪ Revenue: Railways’ revenue for 2021-22 is

estimated at Rs 2,17,460 crore which is an

annual increase of 12% over 2019-20.

▪ Traffic revenue: Total revenue from traffic

for 2021-22 is estimated to be Rs 2,17,110

crore, an annual increase of 12% over 2019-20.

In 2021-22, revenue from both freight and

passenger traffic is expected to grow at an

annual rate of 10% over 2019-20. In 2020-21,

revenue from freight and passenger traffic is

estimated to be 16% and 75% less than the

budget estimates, respectively.

▪ Expenditure: The total revenue expenditure

by Railways for 2021-22 is projected to be Rs 2,10,899 crore, an annual increase of 10% over

2019-20. In 2020-21, revenue expenditure is

estimated to be 34% lower than the budget

estimate. In 2021-22, capital expenditure is

projected at Rs 2,15,058 crore, an annual

increase of 21% over 2019-20. In 2020-21,

capital expenditure is estimated to be 0.4%

higher than the budget estimates.

▪ Operating Ratio: In 2021-22, the Railways’

Operating Ratio is estimated to be 96.2%. This

is marginally better than the operating ratio of

98.4% in 2019-20.

2021-22 Budget announcements2

Key announcements and proposals related to

Railways made in Budget 2021-22 include:

▪ National Rail Plan 2030 has been prepared for

infrastructure development. Under the plan,

following dedicated freight corridors projects

will be undertaken: (i) East Coast Corridor from Kharagpur to Vijaywada, (ii) East-West

Corridor from Bhusaval to Kharagpur to

Dankuni, and (iii) North-South Corridor from

Itarsi to Vijaywada.

▪ Railways will monetise dedicated freight

corridor assets for operation and maintenance.

▪ High-density network and highly utilised

network routes will be provided with an

indigenously developed automatic train

protection system that eliminates train collision

due to human error.

▪ Coaches with enhanced facilities will be

introduced on the tourist routes to provide a

better experience.

Finances in 2020-21: Impact of COVID3

More than 90% of internal revenue of Railways

comes from the core business of running freight

and passenger trains. In 2020-21, passenger traffic

volume is estimated to decline by 87% over the

previous year (Figure 1), as against an increase of

1% estimated at the budget stage. During the initial

phase of the national lockdown (March-April

2020), passenger services of Railways were completely suspended.4 Services have since

resumed to some extent with provisioning of

special trains, however, are yet to return to the pre-

COVID level.

Freight services continued during the lockdown.

However, due to a decline in the economic

activities during April-June 2020, the demand for

freight services may also have been impacted. In

2020-21, the freight traffic volume is estimated to

decline by 7% as compared to the previous year

(2019-20), as against an increase of 3% estimated

at the budget stage. Consequently, in 2020-21, Railways’ own revenue is estimated to be 35% less

than the budget estimate (Table 1). A similar

decline is estimated in revenue expenditure (34%).

This has helped the operating ratio to remain at a

level similar to the budget estimate (97% at the

revised stage as against 96.3% at the budget stage).

Operating ratio is a measure of operational

efficiency. It is the ratio of the working

expenditure (day-to-day operational expenses of

Railways) to the revenue earned from the traffic.

Demand for Grants 2021-22 Analysis: Railways PRS Legislative Research

- 37 -

Figure 1: Growth in traffic volume (year-on-

year)

Note: Number for 2020-21 is as per revised estimates. Traffic

volume taken in terms of: (i) NTKM-Net Tonne Kilometre (One

NTKM is the net weight of goods carried for a kilometre) for

freight, and (ii) PKM –Passenger Kilometre (One PKM is when

a passenger is carried for a kilometre) for passenger services;

Source: Expenditure Profile; Union Budget Documents; PRS.

Table 1: Finances in 2020-21 (Rs crore)

Particular BE RE % change From BE

to RE

1. Internal Revenue 2,25,913 1,46,609 -35%

Gross Traffic Receipts 2,25,613 1,46,309 -35%

Freight revenue 1,47,000 1,24,184 -16%

Passenger revenue 61,000 15,000 -75%

2. Budgetary Support 70,250 29,250 -58%

3. Extra Budgetary Resources

83,292 1,28,567 54%

4. Special Loan from the central government*

0 79,398 -

Total Receipts (1+2+3+4)

3,79,455 3,83,824 1%

5. Revenue Expenditure 2,19,413 1,43,809 -34%

Ordinary Working Expenses

1,62,753 1,40,786 -13%

Pension Fund 53,160 523 -99%

6. Capital Expenditure 1,61,042 1,61,692 0%

7. Appropriation of Special Loan*

0 79,398 -

Total Expenditure (5+6+7)

3,80,455 3,84,899 1%

Operating Ratio 96.3% 97.0% - Note: *Special Loan from the general revenue of the central

government has been provided for COVID-19 related resource

gap in 2020-21 and to liquidate adverse balance in Public

Account in 2019-20 to Pension Fund.

Source: Expenditure Profile; Union Budget 2021-22; PRS.

However, most of the decrease in revenue

expenditure is due to less than required

appropriation to the pension fund. Against the

budget estimate of Rs 53,160 crore, the

appropriation to the pension fund is estimated to be

Rs 523 crore at the revised stage (99% less). If

appropriation were to be as per the requirement, the

operating ratio will worsen to 131.5%.5

In 2019-20 also, appropriation to the pension fund

was 60% less than the budget estimate (Rs 20,708

crore as against the budget estimate of Rs 50,000

crore). The operating ratio in 2019-20 was 98.4%.

If appropriation to the pension fund were to be as

per the requirement, the operating ratio in 2019-20

will be 114.2%.5

Usually, Railways runs only a marginal revenue

surplus. Hence, it finances most of its capital

expenditure from: (i) budgetary support provided

by the central government, and (ii) extra budgetary

resources. In 2020-21, while capital expenditure

target has not seen any notable change from the

budget to the revised stage, the budgetary support

by the central government is estimated to decline

by 58%. As a result, the dependency on extra

budgetary resources for financing capital

expenditure will increase further. Extra budgetary

resources are estimated to be 54% higher than the

budget estimate.

The Standing Committee on Railways (2020) had

observed that the allocation for capital expenditure

at the budget stage in 2020-21 (Rs 1,61,042 crore)

was about 18% less than the demand (Rs 1,97,295

crore).6 It further observed that these funds may

not be adequate for enforcing the ambitious

investment plan of Railways as well as expeditious

completion of pending projects.6

As per the revised estimates, in 2020-21, Railways

will receive a special loan of Rs 79,398 crore from

the central government to: (i) meet the resource gap

due to COVID-19 in 2020-21, and (ii) meet

pension fund obligations for 2019-20.5

Overview of Finances3

Railways’ Revenue

Internal Resources

Railways earns its internal revenue primarily from

passenger and freight traffic. In 2019-20 (latest

actuals), freight and passenger traffic contributed to

about 65% and 29% of the internal revenue,

respectively. In 2021-22, Railways expects to earn

63% of its internal revenue from freight and 28%

from passenger traffic. The remaining 9% will be

earned from other miscellaneous sources such as

parcel service, coaching receipts, and sale of

platform tickets. For details, please see Table 10 in

the Annexure.

Freight traffic: In 2019-20, Railways generated

most of its freight revenue from the transportation

of coal (48%), followed by iron ore (10%), and

cement (8%) (see Figure 2). Railways mostly

transports bulk freight, and the freight basket has

mostly been limited to raw materials for certain

industries such as power plants, and the iron and

steel plants. In 2021-22, Railways expects to earn

Rs 1,37,810 crore from goods traffic, an annual

increase of 10% over 2019-20.

1% 2%

-2%-9%

-87%

-5%

7% 11%

-4% -7%

-100%

-80%

-60%

-40%

-20%

0%

20%

2016-17 2017-18 2018-19 2019-20 2020-21Passenger Freight


- 38 -

Figure 2: Share in freight volume and revenue

in 2019-20 (in %)

Source: Expenditure Profile, Union Budget 2021-22; PRS.

Figure 3: Share of coal in Railways’ freight

Sources: Expenditure Profile, Union Budget Documents; PRS.

While the share of coal in freight volume has been

slowly coming down (from 43% in 2015-16 to 37%

in 2021-22), its contribution to revenue has

remained consistent (45% in 2015-16 as well as

2021-22). This may be indicative of an increasing

dependency on coal for revenue as compared to

other items in the freight basket.

Passenger traffic and revenue: Passenger traffic

is broadly divided into two categories: suburban

and non-suburban traffic. Suburban trains are

passenger trains that cover short distances of up to

150 km and help move passengers within cities and

suburbs. Majority of the passenger revenue (94.4%

in 2019-20) comes from the non-suburban traffic

(or the long-distance trains).

In 2021-22, Railways expects to earn Rs 61,000

crore from passenger traffic, an annual increase of

10% over 2019-20. In 2021-22, passenger traffic is

estimated to grow at an annual rate of 2% over

2019-20. Note that due to the prevalence of

COVID-19, there may be uncertainties in the return

of passenger traffic volume to its normal level in

2021-22, this could impact these estimates.

Challenges in raising revenue

Over the last few years, there has been a decline in

the growth of both rail-based freight and passenger

traffic (see Figure 4). This affects Railways’

earnings from its core business of running freight

and passenger trains. In 2021-22, Railways

estimates a decline in some of its key revenue

earning traffic. For example, coal traffic is

estimated to register an annual decrease of 5% over

2019-20. Overall freight traffic is estimated to

have an annual increase of only 1% over 2019-20.

Figure 4: Volume growth for freight and

passenger (year-on-year)

Note: *The growth rate for 2021-22 BE is compounded annual

growth rate over 2019-20. The figure for 2020-21 is not shown

as it was a non-standard year.


Railways is also steadily losing freight traffic share

to other modes of transport. The share of Railways

in total freight traffic has declined from 89% in

1950-51 to 30% in 2011-12.7 During the same

period, the share of roads on total freight traffic

increased from 11% to 61%. As per the draft

National Rail Plan 2030, the share of Railways in

total freight traffic stood at 27% in 2020.8

NITI Aayog (2018) had highlighted shortfall in

carrying capacity and lack of price competitiveness

as some of the reasons for the decline in freight

share.9 It further observed that since passenger and

freight traffic run on the same tracks, India has not

been able to increase speed or capacity in a

significant manner when compared to global

benchmarks.9 Note that various dedicated freight

corridors have been planned by Railways for

improvement in facilities for freight.

The freight basket is also limited to a few

commodities, most of which are bulk in nature (see

Figure 5). For example, in 2019-20, coal

contributed to about 48% of freight revenue.

Therefore, any shift in transport patterns of any of

these bulk commodities (coal, cement, iron ore)

could affect Railways’ finances significantly.10

Freight cross-subsidises passenger traffic

In 2017-18, passenger and other coaching services

incurred losses of Rs 46,025 crore, whereas freight

operations made a profit of Rs 45,923 crore.10

Hence, all of the profit earned from freight

operations was utilised to compensate for the loss

from passenger and other coaching services. The

total passenger revenue during this period was Rs

48,643 crore. This implies that losses in the

passenger business were about 94.6% of its

0% 20% 40% 60%

Coal

Iron Ore

Cement

Other Goods

Pig Iron & finished steel

Foodgrains

Petroleum & Lubricants

Fertilisers

Container Service

Raw Material for Steel Plants

Share of Freight Volume Share of Freight Revenue

43% 40% 42% 42% 41%33%

37%

45% 43% 46% 45% 48%40%

45%

0%

20%

40%

60%

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Traffic Volume Revenue

-4%

2%

-4% -5%

7%

11%

-4%

1%

6%

-1% 0%

1%2%

-2%

-9%

2%

-15%

-10%

-5%

0%

5%

10%

15%

201

3-1

4

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2021

-22

BE

*

% Growth in freight volume % Growth in passenger volume


- 39 -

revenue. Therefore, in 2017-18, for every one

rupee earned from its passenger business, Indian

Railways ended up spending Rs 1.95. As of 2017-

18, except AC third tier and AC chair car services,

all other classes of passenger services registered

operational losses (Table 2).

NITI Aayog (2016) noted that such cross-

subsidisation has resulted in high freight tariffs.11

It also observed (2018) that high freight tariffs are

one of the reasons for a sub-optimal share of

Railways in freight.9

Figure 5: Losses on Passenger and Other

Coaching Services vis-a-vis Profit on Freight

Services (Rs crore)

Source: CAG; PRS.

Table 2: Operational profit/loss of various

classes of passenger services (in Rs crore)

Class 2014-15 2015-16 2016-17 2017-18

AC-1st Class -127 -176 -139 -165

1st Class -70 -58 -53 -35

AC 2 Tier -496 -463 -559 -604

AC 3 Tier 882 898 1,041 739

AC Chair car -142 -6 118 98

Sleeper Class -8,510 -8,301 -9,313 -11,003

Second class -7,642 -8,570 -10,025 -11,524

Ordinary Class -11,674 -13,238 -14,648 -16,568

EMU suburban services

-4,679 -5,125 -5,324 -6,184

Source: CAG; PRS.

Losses in passenger services are primarily caused

due to: (i) passenger fares being lower than the

costs, and (ii) concessions to various categories of

passengers (senior citizens, National award winners

etc.).11 Railways classifies these provisions as

social service obligations. The Committee on

Restructuring Railways (2015) had observed that

several decisions on the Indian Railways such as

increase in fares, introduction of new trains, and

provision of halts are not taken based on

commercial considerations.12

The Standing Committee on Railways (2020) had

recommended that both freight and passenger fares

should be rationalised prudently.6 It observed that

any fare increase needs to take into account the

competition from other transport modes.6 The

Committee recommended that the social service

obligations of Railways should be revisited.6

Budgetary support from central government

The central government supports Railways in the

expansion of its network and investments. Until

recently, this budgetary support from the central

government used to be the primary source of funds

for capital expenditure for Railways. However,

since 2015-16, an increasingly higher proportion of

the capital expenditure is being met through extra

budgetary resources. In 2019-20, 53% of the

capital expenditure was met through extra-

budgetary resources. In 2021-22, the gross

budgetary support from the central government is proposed at Rs 1,07,300 crore. This is an annual

increase of 26% over 2019-20 (Rs 67,842 crore).

Extra Budgetary Resources

Extra Budgetary Resources include market

borrowings such as financing from banks,

institutional financing, and external investments. External investments in Railways could be in the

form of public-private partnerships (PPPs), joint

ventures, or market financing by attracting private

investors to potentially buy bonds or equity shares

in Railways. Railways mostly borrows funds

through the Indian Railways Finance Corporation

(IRFC). IRFC borrows funds from the market

(through taxable and tax-free bond issuances, term

loans from banks and financial institutions), and

then follows a leasing model to finance the rolling

stock assets and project assets of Indian Railways.

In the past few years, borrowings have increased

sharply to bridge the gap between the available

resources and expenditure. In 2021-22, Rs

1,00,258 crore is estimated to be raised through

extra-budgetary resources, which is an annual

increase of 13% over 2019-20. The Committee on


increased reliance on borrowings could further

exacerbate the financial situation of Railways.12

Table 3: Capital Expenditure (in Rs crore)

2019-20 Actuals

2020-21 Revised

2021-22 Budget

CAGR (19-20 to

21-22)

Gross Budgetary Support

67,842 29,250 1,07,300 26%

Internal Resources

1,321 3,875 7,500 138%

Extra Budgetary Resources

78,902 83,292 1,28,567 13%

Total 1,48,064 1,61,692 2,15,058 21%


0

10,000

20,000

30,000

40,000

50,000

2013-14 2014-15 2015-16 2016-17 2017-18

Profit on Freight Services

Losses on Passenger & Coaching Services


- 40 -

Figure 6: Source of funds - capital expenditure

Note: RE – Revised Estimates, BE – Budget Estimates.


Capital Expenditure

The total proposed capital expenditure for 2021-22

is Rs 2,15,058 crore. This is an annual increase of

21% over 2019-20. Majority of the capital

expenditure will be financed through the budgetary

support from the central government (50%) followed by extra budgetary resources (47%). For

the first time since 2015-16, the budgetary support

from the central government will be higher than the

borrowings. Railways will fund only 3% of this

capital expenditure from its own resources.

Railways’ capability to fund its capital expenditure

from its own revenue stream has been declining

(Figure 6). Over the last few years, actual capital

expenditure has been considerably less than the

budget estimates (Figure 7).

Figure 7: Capital Expenditure - % change from budget estimates to actuals


Debt repayment

Railways pays lease charges to IRFC. The lease

charges have a principal and interest component.

The principal component of the lease charges forms part of the capital expenditure of Railways. In

2021-22, allocation towards payment of principal

component of lease charges is Rs 19,459 crore (9%

of the total capital expenditure), an annual increase

of 36% over 2019-20 (Rs 10,462 crore).

CAG (2020) had observed that ideally, the

principal component of lease charges should be

paid from the Capital Fund.10 Capital Fund is a

dedicated fund of Railways to repay the principal

component of market borrowing and financing

works of capital nature.6 However, no allocation

has been made to this fund since 2015-16.

The Ministry of Railways noted that appropriation

to the Capital Fund is made from net revenue after

meeting obligatory revenue expenditure.6 The

Ministry further observed that no appropriation is

being made to the Capital Fund due to inadequate

internal resources.6 Hence, gross budgetary

support provided by the central government has

been used to pay the principal component of lease

charges. CAG (2020) observed that utilisation of

gross budgetary support for repayment of lease

charges is not a healthy trend as it deprives

Railways of additional investments in capital

works.10 CAG (2019) had observed that if

obligations towards IRFC have to be met from

budgetary support, the government might as well

borrow directly from the market, as the cost of

borrowings would be lower.10

Future Capital Expenditure Requirements

The Ministry of Railways has prepared the

National Rail Plan 2030 for augmenting its

infrastructure during the 2021-51 period.8 The

draft of the National Rail Plan 2030 (NRP),

released in December 2020, noted that Railways could be left with a financing gap of over two lakh

crore rupees for its capital expenditure projects in

next five years.8 This relates to the funding gap for

projects under the annual work plan of Railways

and the National Infrastructure Pipeline prior to the

National Rail Plan.8 The National Infrastructure

Pipeline is a plan of infrastructure projects worth

Rs 102 lakh crore between 2019-20 and 2024-25.

It includes projects worth Rs 13.7 lakh crore for

Railways pertaining to track infrastructure, terminal

infrastructure, rolling stock, and urban public

transport (Table 4). The draft National Rail Plan

envisages an additional capital expenditure worth

Rs 5.8 lakh crore during the 2021-26 period (Table

5).8 However, note that there may be some overlap

in projects envisaged under the National Rail Plan

and the National Infrastructure Pipeline.8

Table 4: Capital Expenditure Requirement for

Railways under the National Infrastructure

Pipeline (in Rs crore) Year Amount

2019-20 1,33,387

2020-21 2,62,465

2021-22 3,08,800

2022-23 2,73,831

2023-24 2,21,209

2024-25 1,67,870

Total 13,67,563

Source: Draft National Rail Plan, Ministry of Railways; PRS.

0%

20%

40%

60%

80%

100%

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

RE

2021

-22

BE

Budgetary Support Internal Resources

Borrowings

-9.1%

-22.1%

-9.0% -7.6%

0.4%

-30%

-20%

-10%

0%

10%

2016-17 2017-18 2018-19 2019-20 2020-21


- 41 -

The draft National Rail Plan estimates that on

average, funds available with Indian Railways for

capital expenditure over the next five years will be:

(i) about Rs 60,000 crore per annum as gross

budgetary support, (ii) about Rs 7,000 crore per

annum from internal resources, and (iii) a

maximum of Rs 1,30,000 crore per annum from

extra budgetary resources.8 It noted that it would be challenging to fund the projects envisaged under

the National Rail Plan from internal resources due

to persistently high operating ratio.8

Table 5: Cost of National Rail Plan

(in Rs lakh crore)

Head 2021 -26

2026 -31

2031 -41

2041 -51

Total

Dedicated Freight Corridors

- 1.5 0.5 0.3 2.3

High Speed Rail Corridors

- 5.1 2.9 7.0 15.0

Network improvements

1.3 0.7 2.2 1.8 6.0

Flyovers and Bypasses

0.8 - - - 0.8

Terminals 0.6 0.2 0.1 0.04 0.9

Rolling Stock 3.1 1.7 3.6 4.8 13.2

Total 5.8 9.2 9.3 13.9 38.2 Source: Draft National Rail Plan, Ministry of Railways; PRS.

Revenue Expenditure

In 2021-22, Indian Railways is estimated to spend a

significant portion of its money on staff (45% of its

working expenditure), followed by expenses on

pension fund (26%), and fuel (13%). In 2021-22,

the total revenue expenditure by Railways is

estimated at Rs 2,10,899 crore which is an annual


Staff wages and pension

Staff wages and pension constitute about 70% of

the Railways’ estimated revenue expenditure in

2021-22. For 2021-22, the expenditure on staff is

estimated at Rs 93,676 crore, which is an annual

increase of 4% over 2019-20. The Committee on


the Railways’ expenditure on staff is extremely

high and unmanageable.12 It also sees a significant

jump every few years due to revisions by the Pay

Commission.

Allocation to the Pension Fund is estimated at Rs

53,300 crore, which is an annual increase of 6.4%

over 2018-19. As discussed earlier, appropriation

to the pension fund was much less than required in

2019-20 and 2020-21 (60% and 99% less than the

budget estimate, respectively). The Standing

Committee on Railways (2017) had observed that

the pension bill may increase further in the next

few years, as about 40% of the Railways staff was

above the age of 50 years in 2016-17.13

The Standing Committee on Railways (2020) noted

that the new pension scheme implemented in 2004

to reduce the pension bill will show results only

around 2034-35.6 The Committee recommended

that feasibility of bearing a part of pension

liabilities from the general revenue of the central

government till 2034-35 should be explored.6

Further, employee costs (including pensions)

reduces Railways’ ability to generate a surplus and

allocate resources towards operations.12 The

Committee on Restructuring Railways (2015) had

recommended that Railways should rationalise its

manpower, and make the organisation more

business-oriented, amenable to private participation

while retaining an optimal level of functional

specialisation within.12 Railways has taken steps to

enhance private participation in the operation of

passenger train services. For instance, proposals

have been invited for private participation in the

operation of passenger train services over 109 origin-destination pairs of routes through the

introduction of 151 trains.14 The private entity will

be responsible for financing, procuring, operating,

and maintaining these trains.

Lease Charges

The interest component of lease charges forms part

of the revenue expenditure of Railways. In 2021-

22, Rs 15,648 crore is estimated to be spent on the

interest component of lease charges, which is an

annual increase of 23% over 2019-20 (Rs 10,391

crore).

Fuel and electricity

In 2021-22, the expense on fuel and electricity is

estimated to be Rs 26,085 crore, an annual decrease

of 9% over 2019-20 (Rs 31,573 crore).

Appropriation to Funds

Depreciation Reserve Fund (DRF)

Appropriation to the DRF is intended to finance the

costs of new assets replacing old ones.6 In 2021-

22, appropriation to DRF is estimated at Rs 800

crore. In the last few years, appropriation to DRF

has declined (Figure 8). In recent years,

appropriation has also been less than the budget

estimates (Figure 9). As per CAG (2020), at the

end of 2018-19, the value of over-aged assets

pending for replacement using this fund was

estimated to be Rs 96,403 crore.10 CAG (2020)

observed that provision to DRF for replacement

and renewal of assets has been inadequate.10


- 42 -

Figure 8: Appropriation to DRF (in Rs crore)


Figure 9: Appropriation to DRF- % change

from budget estimates to actuals


The Ministry of Railways observed that the decline

in appropriation to DRF is due to major part of

renewal and replacement works having safety

implications being financed through Rashtriya Rail

Sanraksha Kosh (RRSK).6 RRSK was created in

2017-18 to finance critical safety-related works of

renewal, replacement, and augmentation of assets.6

The fund has a corpus of one lakh crore rupees over

five years (partially funded by the central government). Railways is required to allocate Rs

5,000 crore annually to RRSK during these five

years.6 The Ministry observed that RRSK will not

continue beyond 2021-22.6 Beyond 2021-22, all

renewal and replacement works will be financed

from DRF.6 This could lead to an increase in

appropriation to DRF in the coming years.

Rashtriya Rail Sanraksha Kosh (RRSK)

In 2021-22, Railways has allocated Rs 5,000 crore

towards RRSK. However, the actual appropriation

to RRSK has been less than the requirement in all

three years between 2018-19 and 2020-21.

Table 6: Appropriation to RRSK (in Rs crore)

Year Budget Actual % change

(Budget to Actual)

2018-19 5,000 3,024 -40%

2019-20 5,000 201 -96%

2020-21 RE 5,000 2,000 -60%

2021-22 BE 5,000 - - Note: RE: Revised Estimates, BE: Budget Estimates.

Sources: Expenditure Profile; Union Budget Documents; PRS.

The Ministry of Railways mentioned that the

desired level of appropriation to RRSK has not

been made due to adverse resource position.6 The

Standing Committee on Railways (2020) observed

that the purpose of RRSK is gradually being eroded

due to non-appropriation of required funds from

internal resources of Railways.6

Expenditure on Safety

The expenditure on safety includes revenue

expenditure such as repairs and maintenance of

tracks and wagons. It also includes capital

expenditure such as track renewals, bridge works,

creating level crossings, and road over bridges and

under bridges (Table 7). In 2021-22, Railways estimates to spend Rs 78,716 crore towards safety,

an annual increase of 6.6% over 2019-20. In 2021-

22, the capital expenditure towards safety-related

works is estimated to register an annual increase of

18.4% over 2019-20.

Table 7: Expenditure on Safety (in Rs crore)

2019-20 Actuals

2020-21 Revised

2021-22 Budget

CAGR (19-20 to

21-22)

Revenue 48,194 43,933 49,206 1.0%

Capital 21,047 26,094 29,510 18.4%

Total 69,241 70,027 78,716 6.6%


Revenue Surplus and Operating Ratio

Railways’ surplus is calculated as the difference

between its total internal revenue and its revenue

expenditure (this includes working expenses and

appropriation to pension and depreciation funds).

Operating Ratio is the ratio of the working

expenditure (expenses arising from day-to-day operations of Railways) to the revenue earned from

traffic. Therefore, a higher ratio indicates a poorer

ability to generate a surplus that can be used for

capital investments such as laying new lines or

deploying more coaches. The CAG (2019) noted

that in 2017-18, the decline in revenue surplus led

to a decline in appropriation to the various funds

managed by Railways from its internal resources.10

As mentioned earlier, a similar trend has been seen

in 2019-20 and 2020-21 where appropriation to the

pension fund, DRF, and RRSK was reduced.

In the last decade, Railways has been struggling to

generate a higher surplus. Consequently, the

Operating Ratio has consistently been higher than

90% for more than a decade. In 2021-22, Railways

expects to generate a surplus of Rs 6,561 crore.

This is an annual increase of 103% over 2019-20

(Rs 1,389 crore). In 2019-20, the operating ratio

worsened to 98.4% as compared to the estimated

ratio of 95%. The CAG (2020) had noted that if

certain advances for 2019-20 were not included in

receipts for 2018-19, the operating ratio for 2018-

7,975

5,600 5,200

1,540300 400 200

800

0

2,000

4,000

6,000

8,000

10,000

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

RE

2021

-22

BE

63%

-69%-40%

-20%

-75%-100%

-50%

0%

50%

100%

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

RE


- 43 -

19 would have been 101.77%.10 If appropriation to

the pension fund were to be as per the requirement,

the operating ratio for 2019-20 and 2020-21 will be

114.2% and 131.5%, respectively.5

Figure 10: Operating Ratio (in Rs crore)


Network expansion and modernisation

Railways has not been able to meet some key

physical targets for expansion and modernisation in

recent years. It has missed its budget targets in all

three years between 2017-18 and 2019-20 for: (i)

construction of new lines, and (ii) gauge conversion

(Table 8). In 2018-19 and 2019-20, Railways also

missed targets for electrification of railway lines.

1 “Evolution – About Indian Railways”, Ministry of Railways,

last accessed on February 2, 2021,

http://www.indianrailways.gov.in/railwayboard/view_section.js

p?lang=0&id=0,1,261. 2 Budget Speech 2021-22, February 1, 2021,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 3 Overview of Receipts and Expenditure,

https://www.indiabudget.gov.in/doc/eb/railstat1.pdf; Railway

Expenditure,

https://www.indiabudget.gov.in/doc/eb/railstat2.pdf, Investment:

Part A Financials (Budget + IEBR), Investment: Part B Physical

Targets, Investment: Part C Revenue Earning Traffic

Performance Targets,

https://www.indiabudget.gov.in/doc/eb/railstat4.pdf, Railway

Budget at a Glance, Expenditure Profile, Union Budget 2021-22. 4 “Cancellation of all train Services by Indian Railways in the

wake of COVID-19”, Press Information Bureau, Ministry of

Railways, March 22, 2020. 5 Notes on Overview of Receipts and Expenditure- Railways,

Expenditure Profile, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/railstat1.pdf . 6 “3rd Report: Demand for Grants (2020-21) - Ministry of

Railways”, Standing Committee on Railways, 2020-21,

http://164.100.47.193/lsscommittee/Railways/17_Railways_3.pd

f. 7 “India Transport Report: Moving India to 2032: Volume II,

National Transport Development Policy Committee 2013, June

17, 2014.

http://planningcommission.gov.in/sectors/index.php?sectors=Na

tional%20Transport%20Development%20Policy%20Committee

%20(NTDPC).

Note that Railways aims to achieve 100%

electrification of all broad gauge routes by 2023.6

As per revised estimates for 2020-21, the

achievement will be less than the budget target on

almost all the indicators listed in Table 8. While

examining the progress of construction of new

lines, the Standing Committee on Railways (2020)

had observed that revision in allocation towards capital expenditure requires reworking of priorities

and rescheduling of activities, which leads to tardy

progress in the construction of new lines.6

Table 8: Physical targets- Underachievement

Indicator 17-18 18-19 19-20 20-21 RE

Construction of new lines (Route Kms)

-49% -52% -28% -40%

Gauge conversion (Route Kms)

-50% -40% -32% -33%

Doubling of lines (Route Kms)

-45% 20% -45% -26%

Wagons (vehicle units)

-48% -20% -24% -17%

Track renewals (Route Kms)

12% 7% 15% -20%

Electrification (Route Kms)

2% -12% -37% 0%

Note: RE: Revised Estimates.


8 The Draft National Rail Plan, Ministry of Railways, December

2020, http://indianrailways.gov.in/NRP-

%20Draft%20Final%20Report%20with%20annexures.pdf. 9 “Strategy for New India @75”, NITI Aayog, November 2018,

https://niti.gov.in/writereaddata/files/Strategy_for_New_India.p

df. 10 Report No. 8 of 2020: Railways Finances, Financial Audit,

For the year ended March 2019, Report of the Comptroller and

Auditor General of India, July 20, 2020,

https://cag.gov.in/uploads/download_audit_report/2020/Report

%20No.%208%20of%202020_English-

05f75b32f3ecdc0.39910555.pdf. 11 “Reviewing the Impact of “Social Service Obligations” by

Indian Railways”, NITI Aayog,

http://niti.gov.in/writereaddata/files/document_publication/Socia

l-Costs.pdf. 12 Report of the Committee for Mobilization of Resources for

Major Railway Projects and Restructuring of Railway Ministry

and Railway Board, Ministry of Railways, June 2015,

http://www.indianrailways.gov.in/railwayboard/uploads/director

ate/HLSRC/FINAL_FILE_Final.pdf. 13 “13th Report: Demands for Grants (2017-18)”, Standing

Committee on Railways, March 10, 2017,

http://164.100.47.193/lsscommittee/Railways/16_Railways_13.p

df. 14 “Ministry of Railways invites Request for Qualifications

(RFQ) for private participation for operation of passenger train

services over 109 Origin Destination (OD) pairs of routes”,

Press Information Bureau, Ministry of Railways, July 1, 2020.

90.2

%

93.6

%

91.3

%

90.5

%

96.2

%

98.4

%

97.3

%

98.4

%

97.0

%

96.2

%

0%

20%

40%

60%

80%

100%

0

50,000

1,00,000

1,50,000

2,00,000

2,50,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

RE

2021

-22

BE

Gross traffic receipts Total working expensesOperating Ratio (RHS)

http://www.indianrailways.gov.in/railwayboard/view_section.jsp?lang=0&id=0,1,261

http://www.indianrailways.gov.in/railwayboard/view_section.jsp?lang=0&id=0,1,261


https://www.indiabudget.gov.in/doc/eb/railstat1.pdf




http://164.100.47.193/lsscommittee/Railways/17_Railways_3.pdf


http://planningcommission.gov.in/sectors/index.php?sectors=National%20Transport%20Development%20Policy%20Committee%20(NTDPC)



http://indianrailways.gov.in/NRP-%20Draft%20Final%20Report%20with%20annexures.pdf

http://indianrailways.gov.in/NRP-%20Draft%20Final%20Report%20with%20annexures.pdf

https://niti.gov.in/writereaddata/files/Strategy_for_New_India.pdf


https://cag.gov.in/uploads/download_audit_report/2020/Report%20No.%208%20of%202020_English-05f75b32f3ecdc0.39910555.pdf



http://niti.gov.in/writereaddata/files/document_publication/Social-Costs.pdf

http://niti.gov.in/writereaddata/files/document_publication/Social-Costs.pdf

http://www.indianrailways.gov.in/railwayboard/uploads/directorate/HLSRC/FINAL_FILE_Final.pdf

http://www.indianrailways.gov.in/railwayboard/uploads/directorate/HLSRC/FINAL_FILE_Final.pdf




- 44 -

Annexure

Appendix I: Railways Budget 2021-22 Summary

Table 9: Railways Receipts and Expenditure for 2021-22 (in Rs crore)

Actuals 2019-20

2020-21 Budget

2020-21 Revised

% Change (20-21 BE to

20-21 RE)

2021-22 Budget

CAGR (19-20 to 21-22 BE)

Receipts

1 Passenger 50,669 61,000

15,000 -75% 61,000 10%

2 Freight 113,488 147,000 124,184 -16% 137,810 10%

3 Other traffic sources 10,200 17,613

7,125 -60% 18,300 34%

4 Gross Traffic Receipts (1+2+3) 174,357 225,613 146,309 -35% 217,110 12%

5 Miscellaneous 338 300

300 0% 350 2%

6 Total Internal Revenue (4+5) 174,695 225,913 146,609 -35% 217,460 12% Expenditure

7 Ordinary Working Expenses 150,211 162,753

140,786 -13% 154,399 1%

8 Appropriation to Pension Fund 20,708 53,160

523 -99% 53,300 60%

9 Appropriation to Depreciation Reserve Fund

400 800

200 -75% 800 41%

10 Total Working Expenditure (7+8+9)

171,319 216,713

141,509 -35% 208,499 10%

11 Miscellaneous 1,786 2,700

2,300 -15% 2,400 16%

12 Total Revenue Expenditure (10+11)

173,105 219,413

143,809 -34% 210,899 10%

13 Net Surplus (6-12) 1,590 6,500

2,800 -57% 6,561 103%

14 Appropriation to Development Fund

1,389 1,500

800 -47% 1,561 6%

15 Appropriation to Capital Fund - - - - -

16 Appropriation to Debt Service Fund

17 Appropriation to Railway Safety Fund

- - - -

18 Appropriation to Rashtriya Rail Sanraksha Kosh

201 5,000

2,000 -60% 5,000 399%

19 Operating Ratio 98.4% 96.3% 97.0% 96.2%

Note: RE – Revised Estimate, BE – Budget Estimate.


Explanatory Notes

Performance parameters

1. ‘Net Surplus’ represents the excess of revenue receipts over revenue expenditure (Railways’ internal revenue and expenditure).

2. ‘Operating Ratio’ is the ratio of operating expenses to receipts. A lower ratio indicates a higher surplus availability for investments.

Railway Funds

3. Depreciation Reserve Fund – Finances the cost of new assets replacing old assets including the cost of any

improved features. Appropriation to this fund is made on the recommendations of the Railway Convention Committee (RCC).

4. Pension Fund – Finances all pension payments to retired Railway staff.

5. Rashtriya Rail Sanraksha Kosh - Finances critical safety-related works of renewal, replacement and augmentation

of assets.


- 45 -

Appendix II: Details of freight and passenger traffic

Table 10: Freight traffic details (NTKM in millions; Earnings in Rs crore)

2019-20 2020-21 Revised

2021-22 Budget

CAGR (19-20 to 21-22

BE)

% share in 2021-22 BE

Commodity NTKM Earning NTKM Earning NTKM Earning NTKM Earning NTKM Earning

Coal 293,051 54,427 218,020 49,776 267,019 61,485 -5% 6% 37% 45%

Iron Ore 50,321 10,966 57,991 12,990 59,508 14,072 9% 13% 8% 10%

Cement 63,933 8,745 64,630 9,482 67,440 10,794 3% 11% 9% 8%

Other Goods 53,631 7,389 60,407 7,946 59,064 8,942 5% 10% 8% 6%

Foodgrains 52,641 6,154 74,344 9,397 64,860 8,866 11% 20% 9% 6%

Pig Iron & finished steel 45,029 7,287 41,693 6,863 47,070 8,772 2% 10% 7% 6%

Fertilisers 47,162 5,808 49,720 6,618 49,305 7,358 2% 13% 7% 5%

Container Service 56,686 2,554 50,837 5,447 56,032 6,518 -1% 60% 8% 5%

Petroleum & Lubricants 30,774 5,928 30,330 5,803 29,992 6,088 -1% 1% 4% 4%

Miscellaneous earnings - 2,016 - 7,979 - 2,518 - 12% 0% 2%

Raw Material for Steel Plants

14,437 2,216 12,520 1,882 14,661 2,397 1% 4% 2% 2%

Total 707,665 113,488 660,492 124,184 714,951 137,810 1% 10% - -

Notes: NTKM – Net Tonne Kilometre (One NTKM is the net weight of goods carried for a kilometre); RE – Revised Estimates; BE –

Budget Estimates.


Table 11: Passenger traffic details (PKM in millions; Earnings in Rs crore)

2019-20 2020-21 Revised

2021-22 Budget

CAGR (2019-20 to 2021-22 BE)

PKM Earning PKM Earning PKM Earning PKM Earning

Total Suburban 137,130 2,843 17,189 345 157,435 3,746 7% 15%

Non-Suburban

AC First class 1,696 453 481 230 1,860 581 5% 13%

AC Sleeper 22,771 3,779 5,257 1,561 24,137 4,879 3% 14%

AC 3 Tier 95,593 12,370 23,518 5,444 91,149 12,778 -2% 2%

Executive Class 617 180 42 22 520 277 -8% 24%

AC Chair Car 10,669 1,754 1,456 428 10,537 2,023 -1% 7%

First Class (M&E) 20 13 27 21 16% 26%

First Class (ordinary) 330 16 2 0 378 21 7% 16%

Sleeper Class (M&E) 267,629 13,552 56,836 5,149 304,243 18,596 7% 17%

Sleeper Class (ordinary) 1,849 90 1 0 972 55 -27% -22%

Second Class (M&E) 383,858 12,563 30,518 1,787 365,063 13,957 -2% 5%

Second Class (Ordinary) 128,576 3,057 817 34 142,806 4,066 5% 15%

Total Non-Suburban 913,608 47,826 118,928 14,655 941,692 57,254 2% 9%

Total 1,050,738 50,669 136,117 15,000 1,099,127 61,000 2% 10%

Notes: PKM – Passenger Kilometre (One PKM is when a passenger is carried for a kilometre); RE – Revised Estimates; BE – Budget

Estimates.

Source: Expenditure Profile; Union Budget 2021-22; PRS

- 46 -

Demand for Grants: Home Affairs The Ministry of Home Affairs is responsible for

matters concerning internal security, centre-state

relations, central armed police forces, border

management, and disaster management. In

addition, the Ministry makes certain grants to eight

Union Territories (UTs). The Ministry was also the nodal authority for managing the COVID-19

pandemic.1,2,3,4,5

In this note we analyse the expenditure trends and

budget proposals of the Ministry for 2021-22, and

discuss some issues across the sectors administered

by the Ministry.


The Ministry has been allocated Rs 1,66,547 crore

in Union Budget 2021-22. This is an 11%

annualised increase from the actual expenditure in

2019-20. The budget for the Ministry constitutes

4.8% of the total expenditure budget of the central

government in 2021-22 and is the third highest

allocation.6

Figure 1 shows the expenditure of the Ministry

between 2011 to 2021. Since 2019, expenditure of

the Ministry also includes grants to the newly

formed UTs of Jammu and Kashmir, and Ladakh.

The average annual growth rate in the expenditure

over the last ten years has been 13.5%.

Figure 1: Expenditure of the Ministry of Home

Affairs (2011-22) (in Rs crore)

Note: Figures for 2020-21 are Revised Estimates and for 2021-


Sources: Union Budget 2011-12 to 2021-22; PRS.

Figure 2 shows the budget allocation and actual

expenditure between 2011-12 and 2021-22, and the

percentage of utilisation of funds. Revised

estimates for expenditure in 2020-21 were 10.7%

lower than budgeted expenditure. This is the first

estimate since 2015-16, where expenditure of the

Ministry has been lower than the budgeted

estimates.

Figure 2: Budget estimates v/s actual expenditure

(2011-21) (in Rs crore)

Note: Figures for 2020-21 are Revised Estimates.


Of the Ministry’s total budget for 2021-22, (i) 62%

of the expenditure is on police, (ii) 32% is on

grants made to all UTs, and (iii) 6% is on

miscellaneous items such as disaster management,

rehabilitation of refugees and migrants, census, and

Cabinet. Table 1 shows the allocations to these

three heads.

Table 1: Ministry of Home Affairs budget

estimates (2021-22) (in Rs crore)

Major Head

2019-20

Actuals

2020-21

Revised

2021-22 Budgeted

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Police 1,02,027 92,849 1,03,803 1%

UTs 15,128 51,282 53,026 87%

Others 17,822 5,257 9,718 -26%

Total 1,34,978 1,49,388 1,66,547 11%

Note: BE – Budget Estimates. Other expenditure within the

Ministry includes disaster management and administrative

matters.


Police: Expenditure on police includes allocation

towards the Central Armed Police Forces, the

Intelligence Bureau, and the Delhi Police. For

2021-22, Rs 1,03,803 crore has been allocated

towards police. This is an increase of 1% over the

actual expenditure on police in 2019-20.

Grants and loans to Union Territories: In 2021-

22, Rs 53,026 crore has been allocated for grants

and loans for the administration of UTs. This is

87% higher than the actual expenditure for 2019-20

(Rs 1,03,803 crore). This is primarily because of

the allocation to the new UTs of Jammu and

Kashmir, and Ladakh (post reorganisation of the

0

40,000

80,000

1,20,000

1,60,000

2,00,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

-15%

-5%

5%

15%

25%

0

50,000

1,00,000

1,50,000

2,00,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Budgeted Estimates Actuals

% under/over utilisation

Demand for Grants 2021-22 Analysis: Home Affairs PRS Legislative Research

- 47 -

state in 2019). Allocation to these two UTs is 69%

of the total amount allocated to all the UTs.

Allocations under this head include grants to five

UTs without legislatures (Andaman and Nicobar

Islands, Chandigarh, Dadra and Nagar Haveli and

Daman and Diu, Lakshadweep, and Ladakh), and

three UTs with legislatures (Delhi, Puducherry, and

Jammu and Kashmir). Allocation towards each of the UTs is detailed in the Annexure.

Other items: Other items include disaster

management, rehabilitation of refugees and

migrants, and administrative matters (relating to the

census, the secretariat and Cabinet). In 2021-22,

these items have been allocated Rs 9,718 crore.

This is 26% lower than the actual expenditure in

2019-20. Further, the allocation for 2021-22 is

85% higher than the revised estimates for 2020-21

(Rs 5,257 crore). This is primarily due to an

increase in allocation towards conducting the

Census of India 2021 from Rs 755 crore in 2020-21 (as per the revised estimates) to Rs 3,768 crore in

2021-22.

Analysis of key areas of expenditure

Police

In 2021-22, Rs 1,03,803 crore has been budgeted

for police expenditure. This includes allocations to

various police organisations, including: (i) the

Central Armed Police Forces, primarily responsible

for border protection and internal security, (ii) the

Delhi Police, responsible for maintenance of law

and order in the national capital territory, and (iii)

the Intelligence Bureau, which is the nodal agency for collection of domestic intelligence. Besides

these, funds are also allocated for modernisation of

police, development of police, and border

infrastructure.

The budget for police is estimated to increase by

1% in 2021-22 over the revised estimates of 2020-

21.

Table 2: Major expenditure items towards

police (in Rs crore)

Department 2019-20 Actual

2020-21 Revise

d

2021-22 Budget

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Central Armed Police Forces

75,672 73,590 77,838 1%

Delhi Police* 8,424 8,242 7,909 -3%

Police Infrastructure

4,063 1,816 3,612 -6%

Modernisation of police

4,637 1,864 2,803 -22%

Intelligence Bureau

2,388 2,434 2,839 9%

Border Infrastructure

2,156 1,495 2,130 -0.6%

Others** 4,688 3,408 6,672 19%

Total 1,02,02

8 1,03,20

2 1,03,80

3 0.9%

Notes: *Includes expenditure on traffic management and

communication network, upgradation of infrastructure and

training, and induction of technology.

** Others includes schemes for safety of women, education and

research, criminology and forensic science, Land Port Authority

of India, and India Reserve Battalion.

BE – Budget Estimates.


Figure 3 shows the trend in police expenditure over

the last ten years (2012-22). Expenditure on police

has increased at an average annual rate of 9%.

Managing the COVID-19 pandemic

Key measures taken by the Ministry of Home Affairs to manage the COVID-19 pandemic include:

▪ The National Disaster Management Authority (which is under the Ministry) imposed a 21-day national lockdown in March 24, 2020 to contain the spread of COVID-19. All inter-state movement except those categorised as essential services were stopped. The lockdown has been extended twelve times, with the latest extension till February 28, 2021.5 Gradual relaxations on movement and services have been introduced in the extended lockdowns. The Ministry has stated that the capacity and health infrastructure such as availability of ICU beds and ventilators have been ramped up during the lockdown. The Standing Committee on Home Affairs (2021) observed that the sudden imposition of the lockdown had severe social and economic impact.1

▪ The Ministry constituted 11 Empowered Groups on different aspects of COVID-19 management in March, 2020. These included: (i) medical emergency planning, (ii) augmenting human resource and capacity building, and (iii) technology and data management.4

▪ Inter-Ministerial central teams were established in West Bengal, Maharashtra, Madhya Pradesh and Rajasthan to examine issues including: (i) supply of essential commodities, (ii) preparedness of health infrastructure, and (iii) conditions of relief camps.2

▪ The Ministry allowed states to spend up to 50% of the funds in State Disaster Response Funds to contain COVID-19. The permission applies towards expenditure on: (i) quarantine, sample collection and screening facilities, and (ii) procurement of essential equipment/labs for COVID-19.3


- 48 -

Figure 3: Expenditure on police (2012-22) (in Rs

crore)

Note: Revised Estimates used for 2020-21 and Budget Estimates

for 2021-22. Actuals used for all other years.


Figure 4 shows the difference between the budget

estimates and actuals expenditure for Police in

percentage from 2011-22. Since 2015-16, the

Ministry has been overspending on police than the

estimates at the budget stage. However, in 2020-

21, revised estimates were 12% lower than the

budgeted estimates.

Figure 4: Budget estimates v/s actual

expenditure on police (2011-21) (in Rs crore)

Note: Figures for 2020-21 are Revised Estimates.


Central Armed Police Forces

The Ministry is responsible for the Central Armed

Police Forces which is composed of seven forces:

(i) Central Reserve Police Force (CRPF) which

assists in internal security and law and order, (ii) Central Industrial Security Force (CISF) which

protects vital installations (like airports) and Public

Sector Undertakings, (iii) National Security Guards

(NSG) which is a special counter-terrorism force,

and (iv) four border guarding forces, namely

Border Security Force (BSF), Indo-Tibetan Border

Police (ITBP), Sashastra Seema Bal (SSB) and

Assam Rifles (AR). Table 9 in the Annexure

discusses expenditure on each of the CAPFs in the

past ten years.

The CAPFs are estimated to receive a total allocation of Rs 77,838 crore in 2021-22. This

accounts for 75% of the expenditure on police. The

highest expenditure is towards the CRPF which

will receive 34% (Rs 26,198 crore) of the total

allocation for CAPF. This is an increase from the

2020-21 revised expenditure (Rs 24,788 crore) and

the actual expenditure in 2019-20 (Rs 25,133

crore). The second highest expenditure is towards

the Border Security Force which has been allocated 27% of the budget, i.e., Rs 20,730 crore. The

allocation is an increase from the 2020-21

allocation (Rs 19,378 crore) and the actual

expenditure in 2019-20 (Rs 20,254 crore).

Vacancies and delayed recruitment

As of January 2020, 10% of sanctioned posts were vacant in the CAPFs. The seven CAPFs had a total

of 1,05,486 vacancies.7 26% of total vacancies are

from the BSF and 24% are from the CRPF. Table

3 shows the percentage of vacancies as of January

2020.

Table 3: Vacancies in CAPFs (as of January

2020)

CAPFs Sanctioned

Strength Actual

Strength % of vacancies

CRPF 3,24,340 2,99,410 8%

BSF 2,65,173 2,37,750 10%

CISF 1,62,541 1,41,650 13%

SSB 97,244 78,809 19%

ITBP 89,567 82,631 8%

AR 66,408 60,524 9%

NSG 10,844 9,857 9%

Total 10,16,117 9,10,631 10%

Note: CRPF- Central Reserve Police Force; BSF- Border

Security Force; CISF-Central Industrial Security Force; SSB-

Sashastra Seema Bal; ITBP-Indo Tibetan Border Police; AR-

Assam Rifles; NSG-National Security Guard.

Sources: “Data of Police Organizations”, Bureau of Police

Research and Development, 2020; PRS.

The Standing Committee on Home Affairs (2019)

noted that continued vacancies were observed in

the Central Armed Police Forces.8,9 Further

vacancies for doctors, cooks and other staff were

not being filled in a timely manner which impacts

service and living conditions for personnel. The

Standing Committee (2018) observed that there

was a lack of foresight, planning, and estimation of

future vacancies, leading to delay in recruitment.10

Delays in recruitment lead to a failure to regularise

training cycle by forces.8 It has recommended the Ministry to proactively identify vacancies and

report the same to recruitment agencies in a time-

bound manner.

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

0%

-6%

6%

-14%

2%4% 5% 4% 4%

-12%

-20%

-15%

-10%

-5%

0%

5%

10%

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21


- 49 -

Service and living conditions

The Standing Committee on Home Affairs (2018, 2019) has highlighted shortfall in housing, poor

quality of food, and lack of access to clean drinking

water among the issues in living conditions for

CAPFs.8,9,10

The Standing Committee (2019) while discussing

the housing shortage for the four border-guarding

CAPFs noted that 39% of the 2.7 lakh sanctioned

houses were available. Another 2019 report also

stated that only 12% of houses sanctioned for

CRPF were available.8 Within the available

housing, there is a further shortage of housing for

non-gazetted officers. The government states that this is primarily due to difficulty in land acquisition

and limited executive power at the local level.

Housing shortage has also been highlighted as an

issue for other CAPFs.9

The issue of food quality has also been highlighted.

In case of border-guarding CAPFs, the Standing

Committee (2019) has observed that it is difficult to

ensure a regular supply of nutritious food due to

postings in remote areas. However, it has

recommended to ensure routine inspection of

quality and supply of food.8 For other CAPFs, the Committee recommends establishing location

specific systems of procurement and provision of

food. It further suggested implementing inbuilt

quality checks through external food inspections.9

Access to clean drinking water for border-guarding

forces is also a challenge. The government

estimates that 82% of ITBP, 78% SSB, 43% of AR,

and 16% of BSF out-posts have not been provided

with potable water. The Committee has

recommended the Ministry to take requisite steps

and for the forces to ensure inspections to ensure

continued access to water for personnel.9,10

Training and management

All CAPFs have set up training institutes to meet

their training requirements and imparting

professional skills on specialised topics. The

Estimates Committee (2020) recommended that the contents of training should include latest

technologies such as IT and cyber security

alongside conventional training.11

In terms of organisational management, the

Standing Committee (2019) highlighted the issue of

stagnation in promotion among personnel of the

CAPFs. For example, in the ITBP, a constable gets

promoted to head constable in 12-13 years, against

the required period of five years.10 In the case of

CISF, the same promotion takes 22 years.12 In this

context, the Standing Committee (2018)

recommended that cadre review of the CAPFs must be expedited to ensure that promotions take place

in a timely manner.12

Modernisation of CAPFs

Figure 5 shows the distribution between revenue and capital expenditure for the seven CAPFs

between 2012-13 and 2021-22. Capital

expenditure is allocation for procurement of

machinery and equipment, and motor vehicles,

whereas revenue expenditure is on items such as

salaries, arms and ammunition, and clothing. Note

that the capital component does not include funds

for construction.

Figure 5: Revenue vs Capital expenditure for

CAPFs (2012-22) (in Rs crore)

Note: Figures for 2020-21 are Revised Estimates and for 2021-

22 are Budget Estimates. Figures for all other years are actuals. Sources: Union Budget 2012-22; PRS.

The average capital expenditure between 2012-13

and 2021-22 was 2% of the total expenditure on CAPFs. Between 2013-18, the actual capital

expenditure was Rs 726 crore out of a budgeted

amount of Rs 1,128 crore.11

The Estimates Committee (2018) stated that the

procurement process under the Modernisation Plan

was cumbersome and time-consuming.13 It

recommended that bottlenecks in procurement

should be identified and corrective action taken.

Further, it stated that the Ministry and CAPFs

should hold negotiations with ordnance factories

and manufacturers in public or private sector to

ensure uninterrupted supply of equipment.13

The 15th Finance Commission has recommended

establishing the Modernisation Fund for Defence

and Internal Security to bridge the gap between

budgetary requirements and allocation for capital

outlay in defence and internal security. The fund

will have an estimated corpus of Rs 2.4 lakh crore

over 2021-26.14

Mobility and connectivity in border areas

Mobility of border guarding forces has been

identified as an issue affecting their operational

efficiency.10 There is a shortage of 4,210 km of

road at the Indo-Pakistan and Indo-Bangladesh

border where BSF personnel are located. There is

also a lack of adequate all-weather roads in remote

-

20,000

40,000

60,000

80,000

1,00,000

20

12-1

3

20

13-1

4

20

14-1

5

20

15-1

6

20

16-1

7

20

17-1

8

20

18-1

9

20

19-2

0

20

20-2

1

20

21-2

2

Revenue Capital


- 50 -

areas where personnel from the Assam Rifles are

posted.10 The Standing Committee on Home

Affairs (2019) has also noted that there is no

provision for mobile connectivity in many border

outposts, and had recommended that the Ministry

provide optical fibre cable connectivity and expand

telecom connectivity.

Table 4 shows the expenditure towards border

infrastructure and management. This includes

allocations for maintenance of border works,

border check posts and out posts, and capital

outlays for various items including barbed wire

fencing, construction of roads, and hi-tech

surveillance on Indo-Bangladesh and Indo-Pakistan

borders. For 2021-22, Rs 2,130 crore has been

budgeted for border infrastructure and

management. Further, note that, the revised

estimates in 2020-21 (Rs 1,495 crore) were 31%

lower than the actual expenditure in 2019-20.

Table 4: Expenditure related to border

infrastructure and management (in Rs crore)


2020-21 Revised

2021-22

Budget

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Maintenance and Border Check post

217 206 209 -2%

Capital Outlay

1,939 1,289 1,921 -0.5%

Total 2,156 1,495 2,130 -1%


Figure 6 shows the total expenditure on border

infrastructure and management between 2011 and

2021. The expenditure has increased at an annual

average growth rate of 5% during this period.

Figure 6: Expenditure on border infrastructure

and management (2011-21) (in Rs crore)


Note: Revised Estimates used for 2020-21 and Budget Estimates

used for 2021-22. Figures for all other years are actuals.

Delhi Police

An amount of Rs 7,909 crore has been allocated to

the Delhi Police in the 2021-22 budget. This is an

annualised decrease of 3.1% compared to the actual

expenditure for 2019-20.

Quality of investigation

The number of solved and unsolved cases of the

Delhi Police between 2015-2018 is in Table 5.

Table 5: Number of cases reported to and solved

by the Delhi Police (2015-2018)

Year Cumulative

Cases reported

Cumulative Cases solved

% of cases unsolved

2015 1,91,377 52,091 73%

2016 2,09,519 55,957 73%

2017 2,33,580 81,219 65%

2018

(up to July, 2018)

1,25,668 37,390 70%

Sources: Starred Question No. 227, Rajya Sabha, Ministry of

Home Affairs, August 8, 2018; PRS.

The Standing Committee on Home Affairs in its

report on the functioning of Delhi Police (2014),

had recommended that investigation should be

separated from law-and-order duties. This is

primarily because police personnel were found to

be overburdened by multi-faceted tasks including

administration and personal security. Further, the

Committee suggested that since investigation

requires legal expertise, the training module of

Delhi Police must include advanced courses on law

and jurisprudence.15

The Committee also observed that extraneous

pressure on investigating agencies was impacting

quality of investigations and causing delays in

resolution of cases.15

Vacancies

As of January 2020, 11% of the total sanctioned

posts in the Delhi Police were vacant.16 The

vacancies between 2015-20 are given in Table 6.

Table 6: Vacancies in Delhi Police (2015-20)

Year Sanctioned

strength Actual

strength % of

vacancies

2015 82,242 77,083 6%

2016 82,224 76,348 7%

2017 84,417 82,979 2%

2018 86,531 74,712 14%

2019 91,963 82,190 11%

2020 91,962 82,195 11%

Sources: “Data of Police Organizations”, Bureau of Police

Research and Development, 2015-20; PRS.


stated that steps should be taken to assess the actual

requirement of police strength to improve the

police-population ratio.15 It recommended that the

Delhi Police may take the assistance of the Bureau

of Police Research and Development to improve

the operational efficiency of the organisation.

-

500

1,000

1,500

2,000

2,500

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 51 -

Corruption and transparency

The Standing Committee on Home Affairs (2014) stated that public perception and anecdotal

evidence pointed towards widespread corruption

and rent-seeking within the Delhi Police.15 The

Committee recommended several measures

including: (i) establishing proactive vigilance

squads and strict follow up actions to

investigations, (ii) prompt enquiry into complaints

of corruption, and (iii) mandatory filing of returns

for assets by officers of every rank.

The central government has stated that vigilance

units of the Delhi Police strictly monitor police

personnel and are empowered to take suo-moto action. Helplines to complain or inform about

instances of bribery or corruption have also been

established by the Ministry in 2014.17

Intelligence Bureau

The Intelligence Bureau (IB) is responsible for the

collection of intelligence within India, and is the primary agency for counter-intelligence. An

amount of Rs 2,839 crore has been allocated to the

IB in 2021-22, which is 9% higher than the actual

expenditure in 2019-20 (Rs 2,388 crore).

Multi Agency Centre

The government set up a Group of Ministers

(GoM) in 2000, to comprehensively review the

national security framework.18 The GoM

recommended that the Ministry of Home Affairs

should put in place arrangements for intelligence

sharing, in which the IB would play the lead role,

along with representatives of the state and central

police forces.18 Based on these recommendations,

the Multi Agency Centre was set up in the IB, for

collating and sharing intelligence with all other

security agencies.18 Further, Subsidiary Multi

Agency Centres have been set up at the state-level

to ensure better coordination between intelligence

agencies.18


observed that state agencies have made lower

contribution in the overall inputs received by the

Multi Agency Centre.18 It recommended that the

Ministry should hold consultations with states to

find out the reasons for this low level of

contribution. Further, the Committee

recommended that there should be a mechanism to

perform validity checks on information obtained

from other agencies, before it is shared with the

Multi Agency Centre.18

Modernisation of Police Forces

For 2021-22, the central government has made

allocations towards four items related to

modernisation of police force. These are: (i)

Modernisation of State Police Forces Scheme; (ii)

the Crime and Criminal Tracking Network and

Systems (CCTNS) scheme; (iii) Security Related

Expenditure (SRE) scheme; and (iv) Special

Infrastructure Scheme (SIS) for Left Wing Areas.

The Modernisation of State Police Forces Scheme

is a centrally sponsored scheme. The cost-sharing

pattern between centre and states is: (i) 90:10 for

north-eastern and Himalayan states, and (ii) 60:40

for all other states.19

Rs 2,803 crore has been allocated for the

modernisation of police forces in 2021-22, which is

22% lower than the actual expenditure for 2019-20.

Revised estimates for 2020-21 are 40% lower than

the actual expenditure for 2019-20.

Table 7: Expenditure related to modernisation

of police (in Rs crore)

Major Head 19-20

Actuals

20-21 Revised

21-22

Budget

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

SRE and SIS for LWE areas

3,707 1,757 2,135 -24%

Modernisation of State Police Forces and CCTNS

930 107 669 -15%

Total 4,637 1,864 2,803 -22%


BE – Budget Estimates, RE – Revised Estimates.


of police forces between 2010-22.

Figure 7: Expenditure on modernisation of

police scheme (in Rs crore) (2010-22)


Notes: Revised Estimates used for 2020-21 and Budget

Estimates used for 2021-22. Actuals used for all other years.

The expenditure has increased at an average annual

rate of 3% in this period.

Shortage of infrastructure

Funds from the modernisation scheme are utilised

for improving police infrastructure through

construction of police stations, and provision of

modern weaponry, surveillance, and

communication equipment. Other objectives under

the scheme include upgradation of training

-

1,000

2,000

3,000

4,000

5,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 52 -

infrastructure, police housing, and computerisation

of records.11

The Comptroller and Auditor General (CAG) has

highlighted lapses in the implementation of the

modernisation scheme in various states. For

instance, in case of Jharkhand, a 2020 CAG report

found that shortage of modern weapons increased

between 2013-2018.20 Further, distribution of arms

and ammunitions in the field was not uniform and

impacted performance. Resource mapping was

also found to be inadequate. For instance, 91% of

communication sets used by the police were found

to be analogue, which were susceptible to

interception.20

An audit of Karnataka for the period 2012-17,

found shortages of weapons ranging between 37%

and 72% for various types of arms. The audit also

found that, as of March 2017, all communication

sets available with the Karnataka police were

obsolete.21

In the case of Maharashtra, an audit was carried out

for the period 2011-12 to 2016-17. 22 The CAG

found a shortage of 45% for modern weaponry in

the state. Further, only 8% of the planned

construction work under the scheme (including

police stations), was completed between 2011-16.22

The Standing Committee (2020) noted that there

was under-utilisation of funds and recommended

measures to improve capacity of implementing

agencies. The Committee has also highlighted that

a major share of funds earmarked for the purpose

of modernisation of police forces went towards

improving infrastructure. It recommends allocating

more funds for enabling mandatory training of

police forces to develop people friendly attitudes,

and for maintaining equipment bought for further

use.23 The importance of training with efforts for modernisation has also been iterated by the CAG in

its reports.20,21

Disaster management

The Ministry of Home Affairs is the nodal ministry

for handling all disasters other than drought, which is

handled by the Ministry of Agriculture.24 Disaster

management includes capacity building, mitigation,

and response to natural calamities and man-made

disasters. Allocation towards various items is shown

in Table 8.

Currently, centre and state governments share costs

for disaster management initiatives. The cost-sharing

pattern between centre and states is: (i) 90:10 for

north-eastern and Himalayan states, and (ii) 75:25 for

all other states. State disaster management funds have

a corpus of Rs 1.6 lakh crore (centre’s share is Rs 1.2

lakh crore. In 2021, the 15th Finance Commission

(2021) recommended retaining this pattern.14

Table 8: Expenditure on major items related to

disaster management (in Rs crore)

Department 19-20

Actuals

20-21

Revised

21-22

Budget

Change (Annualised)

Actuals 2019-20 - BE

2021-22)

National Disaster Response Force

934 1,033 1,209 14%

Disaster management infrastructure

146 106 72 -30%

National Cyclone Risk Mitigation Project

225 99 296 15%

Other schemes

128 122 113 -6%

Total 1,433 1,360 1,691 9%

Note: BE – Budget Estimates. Sources: Union Budget 2021-22;

PRS.

National Disaster Response Force

The National Disaster Response Force (NDRF) is a

specialised force that is responsible for disaster

response and relief. For 2021-22, the budget

estimate for the NDRF is Rs 1,209 crore, which is

14% higher than the actual expenditure for 2019-

20.


noted that there was a standard operating procedure

for deployment of NDRF during a disaster,

according to which, states can requisition for

forces.28 However, states may be unable to make

optimal assessments of the requirements which

could lead to competing demands for mobilisation

of forces in disaster-stricken areas. The Committee

therefore recommended that the National Disaster

Management Authority make an independent

assessment of the number of battalions required to be deployed. This would ensure rational

assessment of needs and optimal prepositioning of

NDRF.28

The 15th Finance Commission (2021) has

recommended sub-dividing allocations to the

NDRF encompassing the complete disaster

management cycle: (i) response and relief, recovery

and reconstruction, (ii) preparedness and capacity

building. It recommends ensuring flexibility for re-

allocation within these sub-windows. The

Commission further recommends providing central assistance to states on a graded cost-sharing

pattern. States must contribute: (i) 10% of

assistance for grants of up to Rs 250 crore, (ii) 20%

of assistance for grants between Rs 250-500 crore,

and (iii) 25% of assistance for grants of more than

Rs 500 crore.14


- 53 -

National Cyclone Risk Mitigation Project

The National Cyclone Risk Mitigation Project (NCRMP) was launched by the Ministry of Home

Affairs with the aim of minimising vulnerability in

states and UTs that are prone to cyclone hazards.

Key objectives of the project include: (i) improving

early warning dissemination systems, and (ii)

construction and maintenance of cyclone shelters.

For 2021-22, a budgetary allocation of Rs 296

crore has been made to this project. This is a 15%

increase from the actual expenditure for 2019-20.

The Standing Committee (2018), noted that

forecasting the rapid intensification of cyclones (as

in the case of cyclone Ockhi), is an area of concern.

It stated that the rapid intensification of cyclones is

no longer a rare phenomenon due to global

warming, and recommended that the existing

capacity for advanced cyclone warning needs to be

bolstered.28

The Standing Committee (2020) further said that commissioning of early-warning dissemination

systems in states including Odisha and Andhra

Pradesh may increase pre-cyclone preparedness.21

However, even for projects commissioned in 2015,

construction had not begun, which may have

adverse impacts during the cyclonic season.23

National Disaster Response Fund

The Disaster Management Act, 2005, mandates the

creation of a National Disaster Response Fund and

State Disaster Response Funds.

Relief assistance is provided to states from the

National Disaster Response Fund in case of severe

natural calamities, where the State Disaster

Response Fund is insufficient to cover the required

expenditure.25

1 “229th Report: Management of COVID-19 Pandemic and

Related Issues”, Department related Standing Committee on

Home Affairs, February 2, 2021,

https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/

ReportFile/15/143/229_2021_2_15.pdf.

2 “Central Government constitutes 6 Inter-Ministerial Central

Teams to make assessment of situation and augment State

efforts to fight and contain spread of COVID-19 effectively”,

Press Information Bureau, Ministry of Home Affairs, April 20,

2020.

3 “Items and norms of assistance under State Disaster Response

Fund (SDRF) for containment measures of COVID-19”,

Ministry of Home Affairs, September 23, 2020,

https://www.mha.gov.in/sites/default/files/MHALetterdt230920

20.pdf.

4 “Constitution of the Empowered Groups under the Disaster

Management Act, 2005”, Ministry of Home Affairs, 2020,

https://mha.gov.in/sites/default/files/MHA%20Order%20on%20

%20Disaster%20Management%20Act%202005.pdf.

5 Order No. 40-3/2020-DM-I(A), Ministry of Home Affairs,

January 29, 2021,

https://www.mha.gov.in/sites/default/files/MHAorderdt_270120

21.pdf.

Allocations to the National Disaster Response Fund

are made by the Ministry of Finance, though it is

administratively controlled by the Ministry of

Home Affairs.25 For the year 2021-22, a budgetary

allocation of Rs 1,209 crore has been made to the

fund, which is a 38% decrease from the actual

expenditure in 2019-20 (Rs 934 crore).

The National Disaster Response Fund is financed

through the National Calamity Contingency Duty

(NCCD) imposed on specified goods under central

excise and customs.26

In order to receive assistance from the NDRF, state

governments must submit a memorandum

indicating the damage and requirement of funds.27 On receipt of the memorandum, an Inter-

Ministerial Central Team (IMCT) is constituted

which will submit a report after an on-the-spot

assessment of the damage. Thereafter, a High-

Level Committee approves the amount of relief to

be released from the NDRF.


noted that there was significant difference between

funds sought by state governments and amounts

approved by the High-Level Committee.28 In most

cases the shortfall was more than 70%, and in some cases more than 95%. According to the

Committee, a reason for this shortfall could be that

by the time the IMCT reaches the disaster-affected

area, the signs of disaster are on the verge of

diminishing. Therefore, it recommended that the

IMCT should make a preliminary visit to the

disaster affected areas, within one week of the

disaster. Further, a joint preliminary damage

assessment should be done with the state

governments concerned.28

6 Demands No. 48-58, Ministry of Home Affairs, Union Budget

2021-22, https://www.indiabudget.gov.in/doc/eb/allsbe.pdf.

7 Data on Police Organisations, 2020, Bureau of Police Research

and Development, Ministry of Home Affairs, October, 2020,

https://bprd.nic.in/WriteReadData/userfiles/file/2021010112010

11648364DOPO01012020.pdf.

8 “220th Report: Action Taken by Government on the

Recommendations/Observations Contained in the Two Hundred

Fifteenth Report on Working Conditions in Non-Border

Guarding Central Armed Police Forces (Central Industrial

Security Force, Central Reserve Police Force and National

Security Guard), Department-Related Parliamentary Standing

Committee on Home Affairs, Rajya Sabha, December 11, 2019,


ReportFile/15/122/220_2020_9_12.pdf.

9 221st Report: Action Taken by Government on the

Recommendations/Observations Contained in the Two Hundred

Fourteenth Report on Working Conditions in Border Guarding

Forces (Assam Rifles, Sashastra Seema Bal, Indo-Tibetan

Border Police and Border Security Force), Department-Related

Parliamentary Standing Committee on Home Affairs, Rajya

Sabha, December 11, 2019,


ReportFile/15/122/221_2020_12_16.pdf.

https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/ReportFile/15/143/229_2021_2_15.pdf


https://www.mha.gov.in/sites/default/files/MHALetterdt23092020.pdf

https://www.mha.gov.in/sites/default/files/MHALetterdt23092020.pdf

https://mha.gov.in/sites/default/files/MHA%20Order%20on%20%20Disaster%20Management%20Act%202005.pdf

https://mha.gov.in/sites/default/files/MHA%20Order%20on%20%20Disaster%20Management%20Act%202005.pdf

https://www.mha.gov.in/sites/default/files/MHAorderdt_27012021.pdf

https://www.mha.gov.in/sites/default/files/MHAorderdt_27012021.pdf

https://www.indiabudget.gov.in/doc/eb/allsbe.pdf

https://bprd.nic.in/WriteReadData/userfiles/file/202101011201011648364DOPO01012020.pdf







- 54 -

10 “214th Report: Working Conditions in Border Guarding

Forces (Assam Rifles, Sashastra Seema Bal, Indo-Tibetan

Border Police and Border Security Force)”, Department-Related


Sabha, 2018,


ReportFile/15/107/214_2018_12_15.pdf.

11 “2nd Report: Action taken by the Government on the

recommendations contained in Twenty-Eight Report (Sixteenth

Lok Sabha) of the Committee on Estimates”, Lok Sabha, 2020,

http://164.100.47.193/lsscommittee/Estimates/17_Estimates_2.p

df.

12 “215th Report: Working Conditions in Non-Border Guarding

Central Armed Police Forces (Central Industrial Security Force,

Central Reserve Police Force, and National Security Guard)”,

Department-Related Standing Committee on Home Affairs,

Rajya Sabha, December 12, 2018,


ReportFile/15/107/215_2018_12_15.pdf.

13 “28th Report: Central Armed Police Forces and Internal

Security Challenges- Evaluation and Response

Mechanism”,Committee on Estimates, Lok Sabha, March 16,

2018,


pf

14 Report for 2021-26, 15th Finance Commission, February,

2021,

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/

Reports/XVFC%20Complete_Report.pdf.

15 “176th Report: The Functioning of Delhi Police”, Department-

Related Parliamentary Standing Committee on Home Affairs,

Rajya Sabha, February 19, 2014,


ReportFile/15/15/176_2016_6_17.pdf.

16 Data on Police Organisations, 2020, Bureau of Police

Research and Development, Ministry of Home Affairs, October,

2020,

https://bprd.nic.in/WriteReadData/userfiles/file/2021010112010

11648364DOPO01012020.pdf.

17 “184th Report: Action Taken by Government on the

recommendations/observations contained in the 176th Report on

the Functioning of Delhi Police”, Department-Related


Sabha, December 12, 2015,


ReportFile/15/15/189_2018_7_15.pdf.

18 “203rd Report: Border Security: Capacity Building and

Institutions”, Department-Related Parliamentary Standing

Committee on Home Affairs, Rajya Sabha, April 11, 2017,


ReportFile/15/15/203_2017_4_11.pdf.

19 Unstarred Question No. 1017, Ministry of Home Affairs,

Rajya Sabha, February 10, 2021,

https://pqars.nic.in/annex/253/AU1017.pdf.

20 Audit Report on General, Social and Economic Sectors for

year ending in March, 2018, CAG, 2020,

https://cag.gov.in/uploads/download_audit_report/2017/Report

%202%20of%202020%20GSES%202017-

18,%20Jharkhand,%20Eng-05f6c7ef871cbb3.88824404.pdf.

21 Audit Report (General and Social Sector) for the year ended

March 2017 for Karnataka, Comptroller and Auditor General,

https://cag.gov.in/sites/default/files/audit_report_files/Report_N

o_2_of_2018_-

_General_and_Social_Sector_Government_of_Karnataka.pdf.

22 Audit Report (General and Social Sector) for the year ended

March 2016 for Maharashtra, Comptroller and Auditor General,

https://cag.gov.in/sites/default/files/audit_report_files/Report_N

o.4_of_2017_%E2%80%93_General_and_Social_Sector_Gover

nment_of_Maharashtra.pdf.

23 “224th Report: Demand for Grants”, Ministry of Home

Affairs, Standing Committee on Home Affairs, March, 2020,


ReportFile/15/122/224_2020_3_15.pdf.

24 Report of the Fourteenth Finance Commission, 2014,

http://www.thehinducentre.com//multimedia/archive/02321/14th

_Finance_Commi_2321247a.pdf.

25 “Operational Guidelines for Constitution and Administration

of the National Disaster Response Fund”, Ministry of Home

Affairs, September 28, 2010,

http://doe.gov.in/sites/default/files/Guidelines%20for%20Nation

al%20Disaster%20Response%20Fund%20%28NDRF%29.pdf.

26 “71st Report: Central Assistance for Disaster Management and

Relief”, Standing Committee on Finance, Lok Sabha,

http://164.100.47.193/lsscommittee/Finance/16_Finance_71.pdf.

27 National Disaster Management Plan, Government of

India,2016,

https://ndma.gov.in/images/policyplan/dmplan/National%20Dis

aster%20Management%20Plan%20May%202016.pdf.

28 “211th Report: The Cyclone Ockhi- Its Impact on Fishermen

and damage caused by it”, Department-Related Parliamentary

Standing Committee on Home Affairs, April 2, 2018,


ReportFile/15/101/211_2018_7_11.pdf.







http://164.100.47.193/lsscommittee/Estimates/16_Estimates_28.pf

http://164.100.47.193/lsscommittee/Estimates/16_Estimates_28.pf

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC%20Complete_Report.pdf











https://cag.gov.in/uploads/download_audit_report/2017/Report%202%20of%202020%20GSES%202017-18,%20Jharkhand,%20Eng-05f6c7ef871cbb3.88824404.pdf



https://cag.gov.in/sites/default/files/audit_report_files/Report_No_2_of_2018_-_General_and_Social_Sector_Government_of_Karnataka.pdf



https://cag.gov.in/sites/default/files/audit_report_files/Report_No.4_of_2017_%E2%80%93_General_and_Social_Sector_Government_of_Maharashtra.pdf





http://www.thehinducentre.com/multimedia/archive/02321/14th_Finance_Commi_2321247a.pdf

http://www.thehinducentre.com/multimedia/archive/02321/14th_Finance_Commi_2321247a.pdf

http://doe.gov.in/sites/default/files/Guidelines%20for%20National%20Disaster%20Response%20Fund%20%28NDRF%29.pdf

http://doe.gov.in/sites/default/files/Guidelines%20for%20National%20Disaster%20Response%20Fund%20%28NDRF%29.pdf

http://164.100.47.193/lsscommittee/Finance/16_Finance_71.pdf

https://ndma.gov.in/images/policyplan/dmplan/National%20Disaster%20Management%20Plan%20May%202016.pdf

https://ndma.gov.in/images/policyplan/dmplan/National%20Disaster%20Management%20Plan%20May%202016.pdf




- 55 -

Annexure

Table 9: Expenditure on grants to Union Territories (in Rs crore)

2019-20

Actuals

2020-21

Revised

2021-22

Budget

% change BE 21-22 /RE 20-21

% of total allocation

Jammu and Kashmir - 30,757 30,757 0% 58%

Ladakh - 5,958 5,958 0% 11%

Andaman and Nicobar 4,949 4,825 5,317 10% 10%

Chandigarh 4,144 4,155 4,661 12% 9%

Puducherry 1,601 1,703 1,730 2% 3%

Lakshadweep 1,297 1,350 1,441 7% 3%

Dadra and Nagar Haveli and Daman and Diu 2,115 1,419 2,204 55% 4%

Delhi 1,022 1,116 958 -14% 2%

Total 15,128 51,282 53,026 3%

Sources: Union Budget 2021-22; PRS. Note: BE – Budget Estimates, RE – Revised Estimates.

Table 10: Expenditure of the Central Armed Police Forces (in Rs crore)

Department 2012-13 2013-14 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22

CRPF 9,983 11,124 14,327 16,804 18,560 21,974 25,133 24,788 26,198

BSF 9,095 10,294 12,996 14,909 16,019 18,652 20,254 19,378 20,730

CISF 3,798 4,301 3,773 6,563 7,614 9,115 10,421 10,677 10,342

ITBP 2,506 3,051 5,662 4,641 5,078 5,699 6,625 6,150 6,567

AR 2,901 3,276 3,848 4,724 5,031 5,694 5,632 5,580 6,161

SSB 2,179 2,719 3,417 4,045 4,641 5,420 6,382 5,950 6,480

NSG 500 498 569 697 968 1,007 1,113 955 1,235

Departmental Accounting 58.4 66.18 77.6 91.7 95 110 111 112 126

Total 31,020 35,329 44,668 52,474 58,006 67,670 75,671 73,590 77,838


Notes: Revised Estimates used for 2020-21 and Budgeted Estimates used for 2021-22; Actuals used for all other years.

CRPF: Central Reserve Police Force; BSF: Border Security Force; CISF: Central Industrial Security Force; AR: Assam Rifles; ITBP: Indo

Tibetan Police Force; SSB: Sashastra Seema Bal; NSG: National Security Guard.

Table 11: Vacancies in CAPFs (2012-20) (in lakhs)

2012 2013 2014 2015 2016 2017 2018 2019 2020

Sanctioned strength 8.9 9.1 9.3 9.5 9.7 11.5 10.8 11 10.1

Actual strength 7.6 8.3 8.7 8.9 9 9.9 10 10 9.1

% of vacancies 14% 9% 6% 7% 7% 14% 7% 9% 10%

Sources: “Data of Police Organizations”, Bureau of Police Research and Development, 2012-20; PRS.

Note: Figures for each year are as of January 1 of that year.

Table 12: State-wise releases from NDRF in 2020-21

(as of November, 2020) (in Rs crore)

State Releases from NDRF % of total releases

West Bengal 1000 62%

Odisha 500 31%

Rajasthan 69 4%

Manipur 27 2%

Meghalaya 17 1%

Tripura 13 1%

Total 1624

Sources: Allocation and Release of Funds from SDRF/ NDRF during 2021-22,

Disaster Management Division, Ministry of Home Affairs; PRS

- 56 -

Demand for Grants: Rural Development

The Ministry of Rural Development is responsible

for the development of and welfare activities in

rural areas. It aims at increasing livelihood

opportunities, providing social safety nets, and

improving infrastructure for growth. The Ministry

has two departments: (i) rural development, and (ii)

land resources. This note presents the budgetary

allocations to the Ministry for 2021-22, and

analyses various issues related to the schemes

implemented by it.

Allocation in Union Budget 2021-22

The Ministry of Rural Development has the fourth

highest allocation across Ministries in 2021-22, at

Rs 1,33,690 crore.1 Table 1 gives the trend in

budgetary allocation towards the Ministry over the

past three years.

Table 1: Budgetary allocation to the Ministry of

Rural Development (Rs crore)

Department Actuals 19-20

RE 20-21

BE 21-22

Annualised change (Actuals 19-20 to

BE 21-22)

Rural Development

1,22,098 1,97,377 1,31,519 4%

Land Resources

1,524 1,252 2,170 19%

Total 1,23,622 1,98,629 1,33,690 4% Note: BE is budget estimate and RE is revised estimate.

Sources: Demands for Grants 2021-22, Ministry of Rural

Development; PRS.

In 2021-22, the Department of Rural Development

has been allocated Rs 1,31,519 crore, accounting

for 98% of the Ministry’s allocation. This is a 4%

annual increase over the actual expenditure in

2019-20.

On the other hand, the Department of Land

Resources has an allocation of Rs 2,170 crore,

which is a 19% annual increase over the actual expenditure in 2019-20. In 2020-21, the

Department was allocated Rs 2,251 crore, which

decreased by Rs 999 crore (44%) at the revised

estimates stage.

Department of Rural Development

The Department of Rural Development under the

Ministry is responsible for implementation of

schemes targeted at poverty reduction, provision of

basic services, employment generation, rural

infrastructure, and habitation development.

In the past 10 years, the expenditure of the

Department has seen an annual growth of

11.3%. In 2020-21, the Department was

allocated Rs 1,20,147 crore, which increased

by Rs 77,229 crore (64%) at the revised

estimates stage. This was due to increased

expenditure on schemes such as MGNREGS

and the National Social Assistance

Programme, to combat the effects of the

Covid-19 pandemic. Thus, in 2021-22 the

estimated expenditure is 33% less than the

revised estimates for 2020-21.

Figure 1: Expenditure by the Department of

Rural Development over the years (Rs crore)

Note: Values for 2020-21 and 2021-22 are revised

estimates and budget estimates respectively.

Sources: Union Budgets 2012-13 to 2021-22; PRS.

The Standing Committee on Rural Development

(2020-21) noted that the allocation for the

Department has not increased substantially over the

past few years.2 It highlighted that the dearth of

funds might be an obstacle to the progress of the

schemes under the Department and recommended

the Department to seek increased fund allocation.2

Major schemes under the Department

In 2021- 22, 56% of the Department’s expenditure is estimated to be on the Mahatma Gandhi National

Rural Employment Guarantee Scheme

(MGNREGS). This is followed by the rural

component of Pradhan Mantri Awaas Yojana –

Gramin (PMAY-G) (15%), and Pradhan Mantri

Gram Sadak Yojana (PMGSY) (11%). Figure 2

shows the composition of expenditure of the

Department.

-40%

-20%

0%

20%

40%

60%

80%

-1,00,000

-50,000

-

50,000

1,00,000

1,50,000

2,00,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Department Expenditure (Rs crore)

% change in expenditure

Demand for Grants 2021-22 Analysis: Rural Development PRS Legislative Research

- 57 -

Figure 2: Top expenditure heads in 2021-

22, as a percentage of total departmental

allocation

Note: MGNREGS is Mahatma Gandhi National Rural

Employment Scheme, PMAY-G is Pradhan Mantri

Awaas Yojana – Gramin, PMGSY is Pradhan Mantri

Gram Sadak Yojana, NRML is National Rural

Livelihood Mission, NSAP is National Social

Assistance Program, Others include Rurban Mission,

and projects like socio-economic and caste survey.

Sources: Demands for Grants 2021-22, Department of

Rural Development: PRS.

Table 2 represents the budgetary allocation for

major schemes under the Department of Rural

Development.

Table 2: Allocation to various schemes under the

Department of Rural Development (Rs crore)

Scheme Actuals 19-20

RE 20-21

BE 21-22

Annualised change (Actuals

19-20 to BE 21-22)

MGNREGS 71,687 1,11,500 73,000 1%

PMAY-G 18,116 19,500 19,500 4%

PMGSY 14,017 13,706 15,000 3%

NRLM 9,022 9,210 13,678 23%

NSAP 8,692 42,617 9,200 3%

Rurban Mission

304 372 600 41%

Others 259 471 541 44%

Total 1,22,098 1,97,377 1,31,519 4%

Note: BE is budget estimate and RE is revised estimate. Others

include projects like management support to rural development

programs, socio-economic and caste census survey and centre’s

expenditure.

Sources: Demands for Grants 2021-22, Department of Rural

Development, Ministry of Rural Development; PRS.

▪ MGNREGS continues to account for more

than half of the Department’s budget. The

funds allocated to it saw a marginal 1%

annualised increase over the actual

expenditure in 2019-20.

▪ Funds allocated to the National Rural

Livelihood Mission (NRLM) has seen an

annualised increase of 23% over the

actual expenditure in 2019-20.

Financial allocations comparing

outcomes

Mahatma Gandhi National Rural Employment

Guarantee Scheme (MGNREGS)

MGNREGS seeks to provide guaranteed 100 days

of wage employment per year to every rural

household whose adult members volunteer to do

unskilled manual work.3

The Mahatma Gandhi National Rural Employment

Guarantee Act, 2005 specifies a list of works that

can be undertaken to generate employment. These

are related to water conservation, land

development, construction, and agriculture, among

others. The scheme at present covers all districts

of the country with the exception of those with

100% urban population.4

In 2021-22, the scheme has been allocated Rs

73,000 crore. The budget allocation for the

scheme was increased by Rs 40,000 crore in 2020-

21 (under the Atmanirbhar Bharat package) to

address the need for more work during the Covid-

19 pandemic including for returning migrant

workers during the lockdown.5

Budgeted versus actual expenditure: Figure 3

shows the expenditure on the scheme from 2012-

13 to 2021-22.

Figure 3: Expenditure on MGNREGS over the

years (Rs crore)

Note: Values for 2020-21 are revised estimates and values for

2021-22 are budgeted estimates.

Sources: Union Budgets from 2012-13 to 2021-220-21; PRS.

The actual expenditure on the scheme from 2015-

16 to 2019-20 has been higher than the budget

estimates for the year. However, in 2020-21, the

revised estimate is 81% higher than the budgeted

estimate to provide for employment initiatives

during the Covid-19 pandemic. Table 3 shows the

trends in allocation and actual expenditure on

MGNREGS over the past nine years.

MGNREGS55.5%

PMAY-G14.8%

PMGSY11.4%

NRLM10.4%

NSAP 7.0%

Rurban Mission 0.5%

Others0.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

-

20,000

40,000

60,000

80,000

1,00,000

1,20,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Actual expenditure % of Department's Budget


- 58 -

Table 3: Budgeted versus actual expenditure on

MGNREGS (Rs crore)

Year Budgeted Actuals % of Budgeted

2012-13 33,000 30,273 92%

2013-14 33,000 32,992 100%

2014-15 34,000 32,977 97%

2015-16 34,699 37,341 108%

2016-17 38,500 48,215 125%

2017-18 48,000 55,166 115%

2018-19 55,000 61,815 112%

2019-20 60,000 71,687 119%

2020-21 61,500 1,11,500 181%

2021-22 73,000 - -

Note: The ‘actuals’ figure for 2020-21 is the revised estimate.

Sources: Union Budgets from 2012-13 to 2021-22; PRS.

Demand for work: MGNREGS is a demand

driven scheme. From 2015-16 to 2019-20, the

average demand from registered households was

42% (in the range of 40% to 43%). However, in

2020-21, the demand for work under the scheme

increased to 51% of the registered households. The

share of households that were provided

employment as compared to the ones demanding

employment, reduced slightly from 90% in 2015-

16 to 87% in 2020-21.6

Employment provided: The scheme guarantees

100 days of employment. However, from 2016-17 to 2020-21, the average number of days of

employment has been 47 days, with a maximum of

51 days of employment in 2018-19. As

MGNREGS is a demand driven scheme, this could

be either due to lower demand for such work

(signalling sufficient opportunities to obtain work

in the open market) or not providing employment

when demanded.

Table 4: Average days of employment provided

per household

Year Employment days / household

2016-17 46

2017-18 46

2018-19 51

2019-20 48

2020-21 46

Sources: MGNREGS MIS Report 2018-19; PRS.

Work Completed: The scheme also aims to create

durable assets to improve rural livelihood through

the work done while providing employment. As

indicated in figure 4, the percentage of work completed under the scheme has been falling for

the last four years. In 2020-21 (as of February

2021) percentage of work completed was at 14%.

Figure 4: Percentage of work

completed (in %)

Sources: MGNREGS MIS Report (as on February 8, 2021);

PRS.

Delayed payments: MGNREGS stipulates that

wage payments must be made within 15 days of

the date of closure of the muster roll.4 Delays in

payments are calculated from the 16th day

onwards. Table 5 shows the percentage of

delayed payments out of the total payments over

the past six years. It also indicates the number of

days by which payments were delayed. As

shown in the table, the proportion of delayed

payments has reduced from 63% in 2015-16 to

2% in 2020-21. The Economic Survey 2018-19,

stated that the implementation of direct benefit

transfers has helped in reducing delays in

payments.7

Table 5: Trends in delayed payment of

wages under MGNREGS (in %)

Year % Delayed Payment

Composition of delayed payments (%)

>90 days 61-90 31-60 15-30

2015-16 63.1% 9.5% 8.1% 19.0% 26.5%

2016-17 56.6% 14.2% 8.4% 15.9% 18.1%

2017-18 15.5% 1.8% 0.9% 3.6% 9.2%

2018-19 10.5% 1.9% 0.7% 2.0% 5.8%

2019-20 6.2% 1.8% 0.7% 1.1% 2.6%

2020-21 2.0% 0.3% 0.2% 0.4% 1.1%

Sources: MGNREGS MIS Report, Delayed Payments (as on

February 8, 2021; PRS.

Unemployment allowance: Currently under

MGNREGS, unemployment allowance (if

employment is not provided by the state

government within 15 days of application) is

paid from state government funds.3 A CAG

report (2013) on the scheme states that this puts

an additional burden on the states.8 It

suggested that the Ministry of Rural

Development should consider partial

reimbursement of unemployment allowance.8

Further, the Standing Committee on Rural

Development (2020) noted that in the financial

year 2019-20, only four states had paid

unemployment allowances to the tune of Rs

12,000 (in total).2 It expressed doubts on

98%83%

56%

14%

0%

20%

40%

60%

80%

100%

Com

ple

ted

asof

20

17-1

8

2018

-19

2019

-20

2020

-21


- 59 -

whether all other job seekers were provided

jobs in the stipulated time and noted this as

states not providing the unemployment

allowance.2 It recommended that the

Department of Rural Development devise

measures to oversee the implementation of the

provision of unemployment allowance.2

Indexing of minimum wage rate: The minimum

wage rate under the scheme is fixed by the central

government on the basis of the Consumer Price

Index-Agricultural Labourers (CPI-AL). If this is

not available, the minimum wage rate fixed by the

states for agricultural labourers is considered.9 The

Standing Committee on Rural Development (2020)

noted that the wage rate under MGNREGS is much

less than the minimum wages fixed by states.2

Further, the agricultural labourers receive wages

higher than the MGNREGS workers. The

Committee noted that this may be discouraging

labourers from enrolling under MGNREGS and migrating to cities for work.2 It recommended

increasing the minimum wages under MGNREGS

periodically after taking inflation into account.2

The Committee on Alignment of MGNREGS

wages under the Ministry of Rural Development

(2017) also noted that the type of work done by

agricultural labourers and MGNREGS workers is

different.10 Thus, there should be difference in

their minimum wages. It also noted that the

Consumer Price Index-Rural was more recent and

provided for higher expenditure on education and medical care compared to CPI-AL.10 It

recommended using CPI-Rural instead of the

existing CPI-AL for revising MGNREGS wages.10

Further, every state has its defined Schedule of

Rates for defining work output and calculating

wages, thus the wage can be different for every

state. The Standing Committee on Rural

Development (2020) noted the existing disparity in

MGNREGS wages in various states.2 The

Committee on Alignment of MGNREGS (2017)

noted that this variation is not desirable for a programme where wage component is fully funded

by the centre. It recommended convergence on

Schedule of Rates across states to avoid variation.10

Pradhan Mantri Awaas Yojana- Gramin

Pradhan Mantri Awaas Yojana- Gramin (PMAY-

G) has the second highest allocation in the Department’s budget in 2021-22. The funds

allocated to the scheme (Rs 19,500 crore) comprise

15% of the Department’s finances.

In the past eleven years, the expenditure on

the scheme has seen an average annual growth

of 7%.

Figure 5: Expenditure on PMAY-G over the

years (Rs crore)

Note: Value for 2020-21 is revised estimate.


Target construction of houses: Figure 6 shows

the number of houses completed compared to the

target construction in the last five years. The

construction rate has been lower than the target for

all these years. However, the construction rate

declined substantially in 2019-20 and 2020-21.

Till October 2020, the completion rate for 2020-21

was at 3%. This may be due to the inability to

carry out construction due to the lockdown

enforced due to the Covid-19 pandemic.

Figure 6: Construction performance of Pradhan

Mantri Awaas Yojana (no. of houses in lakhs)

Note: Data for 2020-21 is as of October 30, 2020.

Sources: Awaassoft (MIS), PMAY-G; PRS.

The Standing Committee on Rural Development

(2020) noted the slow pace of progress under the

scheme.2 It observed that one of the biggest

hurdles for the timely completion of houses, is

delay in the release of instalments under PMAY-G

to beneficiaries. It recommended the Department

of Rural Development to streamline the method for

the timely release of instalments and explore ways

to ensure that construction of houses is completed

within the targeted time frame.2

Increase in financial assistance under PMAY-G:

Under PMAY-G, financial assistance of Rs

1,20,000 in plain areas and Rs 1,30,000 in hilly

areas is provided to rural BPL households for

construction of a dwelling unit. The Standing

Committee on Rural Development (2019) noted

0

5,000

10,000

15,000

20,000

25,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

0%

20%

40%

60%

80%

100%

0

10

20

30

40

50

60

70

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Target Houses Completed % Completed


- 60 -

that the financial assistance provided is not

proportionate with the rising inflationary cost of the

construction, material and other aspects of house

building.11 Further, Standing Committee on Rural

Development (2020-21) noted the disparity in

assistance for constructing a house in rural and

urban areas (assistance of about Rs 2,50,000 per

house). 2 It noted that there are several logistical issues in rural areas that may not be there in urban

areas. It recommended the Ministry to increase the

assistance provided by them under the PMAY-G

scheme and bring parity between the per-unit

assistance in rural and urban areas.2,11

Pradhan Mantri Gram Sadak Yojana

Pradhan Mantri Gram Sadak Yojana (PMGSY)

seeks to provide all-weather road connectivity to

all eligible unconnected habitations, existing in

the core network in rural areas of the country.

The scheme has been allocated Rs 15,000 crore

in 2021-22, accounting for 11.4% of the

Department’s budget.

As Figure 7 indicates, the expenditure on the

scheme has been decreasing since 2015-16.

Figure 7: Expenditure on PMGSY over

the years (Rs crore)

Note: Value for 2020-21 is the revised estimates.


Underutilisation of funds: Table 6 shows the trends in allocation and actual estimates of

expenditure on PMGSY. Since 2017-18, there

has been significant underutilisation of funds.

Table 6: Budgeted versus actual expenditure

on PMGSY (Rs crore)


2014-15 14,391 14,188 99%

2015-16 14,291 18,290 128%

2016-17 19,000 17,923 94%

2017-18 19,000 16,862 89%

2018-19 19,000 15,414 81%

2019-20 19,000 14,017 74%

2020-21 19,500 13,706 70%

2021-22 15,000 - -

Note: The ‘Actuals’ figure for 2020-21 is the revised estimate.


Slow pace of work: The Standing Committee on

Rural Development (2020-21) noted that the pace

of work under the scheme has been slow,

especially in hilly states like Uttarakhand.2 It noted

that the delay in approval of Detailed Project

Reports is the main cause for the slow pace of the

scheme. It recommended that the Department of

Rural Development ensure timely preparation and approval of Detailed Project Reports and increase

the pace of completion of projects.2

Difference between targets and achievements:

Figures 8 and 9 give details of length of roads

constructed and habitations connected in the last

five years, under the scheme.

Figure 8: Length of road constructed under

PMGSY (in km)

Note: Data for 2020-21 is as of February 4, 2021.

Sources: Pradhan Mantri Gram Sadak Yojana Online

Management, Monitoring and Accounting System (OMMAS),

Ministry of Rural Development; PRS.

Since 2016-17, the Ministry has not been able to

achieve its targets for both the number of

habitations to be connected and the road length to

be constructed. Between April 2020 and Feb 2021,

only 30% of the targets for roads to be constructed

and target habitations to be connected were

completed. While slow pace of construction in

2020-21 could be attributed to the Covid-19

induced lockdown, note that the rate of

construction was low in 2019-20 as well (54% of

target length was completed and 43% of target habitations were connected).

Figure 9: Habitations connected under PMGSY

Note: Data for 2020-21 is as of February 4, 2021.

Sources: Pradhan Mantri Gram Sadak Yojana Online

Management, Monitoring and Accounting System (OMMAS),

Ministry of Rural Development; PRS.

- 2,500 5,000 7,500

10,000 12,500 15,000 17,500 20,000

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

-

20,000

40,000

60,000

80,000

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Target Length Completed Length

-

5,000

10,000

15,000

20,000

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Target Habitation Connected Habitations


- 61 -

Maintenance of roads: For ensuring

sustainability of roads built under PMGSY, each

contractor has to provide for: (i) defect liability

for five years, and (ii) paid routine maintenance

after completion of work. The Standing

Committee on Rural Development (2020-21)

noted that the upkeep and maintenance of roads

has been poor. It recommended the Ministry to ensure stricter norm compliance and hold the

contractors and agencies accountable for their

negligence.2

National Social Assistance Program

National Social Assistance Program (NSAP) is a

welfare program comprising of sub-schemes aimed at providing public assistance to citizens in case of

unemployment, old age, sickness, and any form of

disability. The major schemes include Indira

Gandhi National Old Age Pension Scheme, Indira

Gandhi National Widow Pension Scheme, and

Indira Gandhi National Disability Pension Scheme.

In 2021-22, the scheme has been allocated Rs 9,200

crore (7% of the Department’s finances), which is a

4% annualised increase over the actual expenditure

in 2019-20. The expenditure on the scheme was

increased substantially in 2020-21, owing to Rs 30,957 crore spent on direct benefit transfers to

women account holders of Pradhan Mantri Jan

Dhan Yojana (Rs. 500 for three months).12 This

was an initiative under the PM Garib Kalyan

Package to combat the economic effects of the

Covid-19 pandemic.

Table 7 shows the budget estimates and actual

expenditure under the scheme from 2014-15 to

2020-21. It can be noted that the allocation

towards the scheme has been similar since 2014-15.

Table 7: Expenditure under NSAP (Rs crore) Year Budgeted Actuals % of Budgeted

2014-15 10,635 7,087 67%

2015-16 9,082 8,616 95%

2016-17 9,500 8,854 93%

2017-18 9,500 8,694 92%

2018-19 9,975 8,418 84%

2019-20 9,200 8,692 94%

2020-21 9,197 42,617 463%

2021-22 9,200 - - Note: The ‘Actuals’ figure for 2020-21 is the revised estimate.


Increase of assistance amount: The Standing

Committee on Rural Development (2020-21) noted

that the assistance amount (ranging from Rs 200 to

Rs 500 per month) under the different components

of the scheme is inadequate.2 It recommended the

Department of Rural Development to increase the

assistance amounts under the scheme.2

National Rural Livelihoods Mission

National Rural Livelihoods Mission (NRLM) aims to reduce poverty through promotion of

diversified and gainful self-employment and

skilled wage employment opportunities. In

2021-22, the funds allocated to the scheme (Rs

13,678 crore) comprise 10.4% of the

Department’s finances.

Table 8 shows the actual expenditure by states

under the scheme from 2012-13 to 2019-20.

Table 8: Expenditure under NRLM (Rs crore)


2012-13 3,915 2,195 56%

2013-14 4,000 2,022 51%

2014-15 4,000 1,413 35%

2015-16 2,505 2,514 100%

2016-17 3,000 3,157 105%

2017-18 4,500 4,327 96%

2018-19 5,750 5,783 101%

2019-20 9,024 9,022 100%

2020-21 9,210 9,210 100%

2021-22 13,678 - -

Note: From 2015-16, allocation to start-up village

entrepreneurship program has also been included.


Department of Land Resources

The Department of Land Resources aims to

increase productivity of degraded land through the

process of integrated watershed management. It

also aims to develop an integrated land information

management system to improve real-time

information on land, and to optimise use of land

resources.

The Department of Land Resources implements

two key schemes: (i) Integrated Watershed

Development Component of Pradhan Mantri

Krishi Sinchai Yojana (WDC-PMKSY), and (ii)

Digital India Land Records Modernisation

Programme (DILRMP).

In 2021-22, the Department was allocated Rs 2,170

crore, which is a 19% annualised increase over the



- 62 -

Table 9: Budgetary allocation to the Department

of Land Resources (Rs crore)

Major Heads Actuals 19-20

Revised 20-21

Budgeted 21-22

Annualised change

(Actuals 19-20 to

BE 21-22)

WDC - PMKSY 1,467 1,000 2,000 17%

DILRMP 44 238 150 85%

Secretariat 13 14 20 28%

Total 1,524 1,252 2,170 19%

Note: WDC - Watershed Development Component PMKSY is

Pradhan Mantri Krishi Sinchai Yojana. DILRMP is Digital

India Land Records Modernisation Programme. BE is budget

estimate and RE is revised estimate.

Sources: Demands for Grants 2021-22, Department of

Land Resources, Ministry of Rural Development; PRS.

Watershed Development Component of

Pradhan Mantri Krishi Sinchai Yojana

The Integrated Watershed Management

Programme aims to develop rain fed portions

of net cultivated area and culturable wastelands.13 In 2015, it was subsumed as one

of the components of Pradhan Mantri Krishi

Sinchayee Yojana (PMKSY).

The activities under Watershed Development

Component are drainage line treatment, soil

and moisture conservation, rain water

harvesting, and afforestation, among others.

The scheme received the highest allocation of

Rs 2,000 crore (92%) under the Department’s

budget. Table 10 shows the actual expenditure

under the scheme from 2015-16 to 2020-21.

Note that there is under-utilisation of the

budgeted amounts for the last five years.

Table 10: Expenditure under WDC-PMKSY (Rs

crore)

Year Budgeted Actuals % of

Budgeted

2015-16 1,530 1,527 100%

2016-17 1,550 1,510 97%

2017-18 2,150 1,671 78%

2018-19 2,251 1,786 79%

2019-20 2,066 1,467 71%

2020-21 2,000 1,000 50%

2021-22 2,000 - -

Note: The ‘Actuals’ figure for 2020-21 is revised estimate.


Completion of projects: The Standing

Committee on Rural Development (2020-21) noted the slow pace of completion of projects

under the scheme.2 As of November 2020, of

the 8,214 sanctioned projects, 4,486 (55%)

projects have been reported completed.14 The

Committee recommended accelerating the pace

of project completion.2

Digital India Land Records Modernisation

Programme (DILRMP)

DILRMP is a part of the Digital India

initiative.15 The scheme was changed into a

Central Sector Scheme in April 2016.16 With

this change, the scheme is now implemented by

the central government with 100% of the grants

coming from the centre.

The major components of the programme

include: (i) computerisation of all existing land

records, (ii) digitisation of maps, (iii) survey/re-

survey, and updating of all settlement records,

and (iv) computerisation of registration and its

integration with the land records maintenance system.

In 2021-22, the programme has been allocated Rs

150 crore, which is an 85% annualised increase

over the actual expenditure in 2019-20. Table 11

shows the trends in allocation and actual

expenditure on the programme over the past six

years. Note that there is significant underspending

across all the years except 2020-21.

Table 11: Budgeted versus actual

expenditure on DILRMP (Rs crore)

Year Budgeted Actuals % of

Budgeted

2015-16 90 40 44%

2016-17 150 139 93%

2017-18 150 93 62%

2018-19 250 68 27%

2019-20 150 44 29%

2020-21 239 238 100%

2021-22 150 - -

Note: The ‘utilised’ figure for 2020-21 is the revised estimate.


Progress of components under DILRMP:

DILRMP is currently being implemented in all

states, but with differential progress.17

Land records have been computerised for 91% of

the villages.17 However, the mutation records

(recording the transfer of ownership) have been

computerised for only 71% of the villages.17 This

means that the remaining 27% of the villages do

not have updated records with the current data on

ownership. If the intent of digitising records is to

have easy access to correct data, real time updating

of property records becomes essential.

Further, real time updation of Record of Right

(RoR) and maps has been done for only 30% of the

villages.17 The RoR is the primary record that

shows how rights on land are derived for the land

owner, and records the property’s transactions from

time to time. 30 states/ UTs have started issuing

digitally signed RoRs.17


- 63 -

Slow pace of work: The Standing Committee on

Rural Development (2020-21) noted that the work

under the programme is being completed at a slow

1 Demand No. 86, Department of Rural Development, Ministry

of Rural Development, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe86.pdf; Demand No.

87, Department of Land Resources, Ministry of Rural

Development, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe87.pdf. 2 “Standing Committee on Rural Development, Demand for

Grants 2020-21, Department of Rural Development, Ministry of

Rural Development”,

http://164.100.47.193/lsscommittee/Rural%20Development/17_

Rural_Development_4.pdf. 3 The National Rural Employment Guarantee Act, 2005

https://nrega.nic.in/amendments_2005_2018.pdf. 4 Mahatma Gandhi National Rural Employment Guarantee

Act, 2005, Operational Guideline 2013,

https://nrega.nic.in/Circular_Archive/archive/Operational_g

uidelines_4thEdition_eng_2013.pdf. 5 15th Finance Commission Report, Volume III, February 1,

2021,


Reports/XVFC%20Complete_Report.pdf 6 MNREGA MIS Report, 2015-16 to 2021-22, Ministry of Rural

Development,

http://mnregaweb4.nic.in/netnrega/MISreport4.aspx. 7 Effective use of technology for welfare schemes – Case of

MGNREGS. Economic Survey 2018-19, Volume I.

https://www.indiabudget.gov.in/economicsurvey/doc/vol1chapte

r/echap10_Vol1.pdf. 8 “Report No. 6, Performance Audit of Mahatma Gandhi

National Rural Employment Guarantee Scheme”, Comptroller

and Auditor General of India, 2013,

http://www.cag.gov.in/sites/default/files/audit_report_files/Unio

n_Performance_Civil_Ministry_Rural_Development_6_2013.p

df. 9 The National Rural Employment Guarantee Act, 2005,

https://nrega.nic.in/amendments_2005_2018.pdf. 10 “Report of the Committee on Alignment of MGNREGA

Wages with Minimum Agricultural Wages.” July, 2017.

pace.2 It recommended the Ministry to ensure

expeditious completion of modernisation of land

records in all states.2

Ministry of Rural Development, MGNREGA Division.

http://www.im4change.org/siteadmin/tinymce/uploaded/Draft%

20report%20of%20Nagesh%20Singh%20Committee%20July%

202017.pdf. 11 “Standing Committee on Rural Development, 2019-20,

Department of Land Resources, Ministry of Rural

Development”

http://164.100.47.193/lsscommittee/Rural%20Development/17_

Rural_Development_3.pdf. 12 “Direct cash transfer to women PMJDY account holders under

PM Garib Kalyan Package for the month of April 2020 in the

light of COVID-19 pandemic”, Ministry of Rural Development,

April 3, 2020. 13 Programme Details, Watershed Development Component Of

Pradhan Mantri Krishi Sinchai Yojana (WDC-PMKSY),

Department Of Land Resources, Ministry of Rural Development

https://dolr.gov.in/programme-schemes/pmksy/watershed-

development-component-pradhan-mantri-krishi-sinchai-yojana-

wdc-pmksy. 14 Unstarred Question no. 1587, Ministry of Agriculture and

Farmer Welfare, September 2020,

http://164.100.24.220/loksabhaquestions/annex/174/AU1587.pd

f. 15 Digital India Land Records Modernization Program,

Department of Land Resources, Ministry of Rural

Development,

http://nlrmp.nic.in/faces/common/home.xhtml. 16 “Rationalization of Centrally Sponsored Scheme

DILRMP as Central Sector Scheme”, Department of Land

Resources, Ministry of Rural Development, September 22,

2016.

http://dolr.nic.in/dolr/downloads/PDFs/DILRMP%20Clarifi

cations%202016-09-22.pdf. 17 “Digital India Land Records Modernization Programme –

MIS, last accessed on February 11, 2021, http://dilrmp.gov.in/#.



http://164.100.47.193/lsscommittee/Rural%20Development/17_Rural_Development_4.pdf

http://164.100.47.193/lsscommittee/Rural%20Development/17_Rural_Development_4.pdf

https://nrega.nic.in/amendments_2005_2018.pdf

https://nrega.nic.in/Circular_Archive/archive/Operational_guidelines_4thEdition_eng_2013.pdf

https://nrega.nic.in/Circular_Archive/archive/Operational_guidelines_4thEdition_eng_2013.pdf



http://mnregaweb4.nic.in/netnrega/MISreport4.aspx

https://www.indiabudget.gov.in/economicsurvey/doc/vol1chapter/echap10_Vol1.pdf

https://www.indiabudget.gov.in/economicsurvey/doc/vol1chapter/echap10_Vol1.pdf

http://www.cag.gov.in/sites/default/files/audit_report_files/Union_Performance_Civil_Ministry_Rural_Development_6_2013.pdf



https://nrega.nic.in/amendments_2005_2018.pdf

http://www.im4change.org/siteadmin/tinymce/uploaded/Draft%20report%20of%20Nagesh%20Singh%20Committee%20July%202017.pdf



http://164.100.47.193/lsscommittee/Rural%20Development/17_%20Rural_Development_3.pdf

http://164.100.47.193/lsscommittee/Rural%20Development/17_%20Rural_Development_3.pdf

https://dolr.gov.in/programme-schemes/pmksy/watershed-development-component-pradhan-mantri-krishi-sinchai-yojana-wdc-pmksy





http://nlrmp.nic.in/faces/common/home.xhtml

http://dolr.nic.in/dolr/downloads/PDFs/DILRMP%20Clarifications%202016-09-22.pdf

http://dolr.nic.in/dolr/downloads/PDFs/DILRMP%20Clarifications%202016-09-22.pdf

http://dilrmp.gov.in/

- 64 -

Demand for Grants: Agriculture and

Farmers’ Welfare

The Ministry of Agriculture and Farmers’ Welfare

has two Departments: (i) Agriculture, Cooperation

and Farmers’ Welfare, which implements policies

and programmes related to crop husbandry and

manages agriculture inputs, and (ii) Agricultural

Research and Education, which coordinates and

promotes agricultural research and education. This

note examines the budget allocations to the two Departments of the Ministry and their expenditure,

and discusses issues in the agriculture sector.


The Ministry has been allocated Rs 1,31,531 crore

in 2021-22, a 14% annual increase over 2019-20.1

Allocation to the Ministry accounts for 4% of the

government’s budget. The Ministry had estimated

an expenditure of Rs 1,42,762 crore in 2020-21,

which has been reduced by 13% to Rs 1,24,520 crore at the revised stage.2 This includes a cut of

Rs 10,000 crore in the proposed expenditure on the

PM-KISAN scheme (income support scheme for

farmers), due to coverage of lower beneficiaries

than initially estimated.3 In 2020-21 and 2021-22,

PM-KISAN is estimated to cost Rs 65,000 crore.

49% of the allocation to the Ministry in 2021-22 is

for the PM-KISAN scheme. All other programmes

of the Ministry, including interest subsidy and crop

insurance, have been allocated Rs 66,531 crore in

2021-22, a 12% annual increase over 2019-20.

Figure 1: Expenditure of the Ministry (Rs crore)

Note: Revised estimate in 2020-21; Budget estimate in 2021-22.


Before PM-KISAN, the Ministry’s expenditure saw

a large increase in 2016-17 due to the interest

subsidy provided on short-term credit to farmers.

The subsidy, earlier provided by the Ministry of

Finance, is being provided by the Ministry of

Agriculture and Farmers’ Welfare since 2016-17.

Departments: The Department of Agriculture,

Cooperation and Farmers’ Welfare has received

94% of the allocation to the Ministry in 2021-22,

while 6% has been allocated to the Department of

Agricultural Research and Education (Table 1).

Table 1: Allocation to the Ministry (in Rs crore)


2020-21 Revised

2021-22 Budget

% change (annualised) in 2021-22

over 2019-20

Agriculture, Cooperation and Farmers’ Welfare

94,252 1,16,758 1,23,018 14%

Agricultural Research and Education

7,523 7,762 8,514 6%

Ministry 1,01,775 1,24,520 1,31,531 14%


The Department of Agriculture, Cooperation and

Farmers’ Welfare has been allocated Rs 1,23,018

crore in 2021-22, which is a 14% annual increase

over 2019-20. 76% of the Ministry’s budget is

proposed to be spent on three schemes under this

Department: the income support scheme, i.e., PM-

KISAN (49%), interest subsidy on short-term credit

to farmers (15%), and the crop insurance scheme,

i.e., Pradhan Mantri Fasal Bima Yojana (12%).

The Department of Agricultural Research and

Education has been allocated Rs 8,514 crore in

2021-22, a 6% annual increase over 2019-20.4

Allocation to the Indian Council of Agricultural

Research (ICAR) accounts for 63% of the

Department’s allocation in 2021-22. See Table 8

and in the Annexure for more details.

0

30,000

60,000

90,000

1,20,000

1,50,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure excluding PM-KISAN PM-KISAN

Policy Proposals in the Budget Speech

In her 2021-22 budget speech, the Finance Minister made the following proposals regarding agriculture:

▪ An Agriculture and Infrastructure Development Cess will be levied on certain goods for financing agriculture infrastructure and other development activities. These goods include certain imports such as cotton, coal, gold, silver, and alcoholic beverages, and petrol and diesel.

▪ The Agriculture Infrastructure Fund will be made available to the Agriculture Produce Market Committees (APMCs) for augmenting their infrastructure facilities. 1,000 more mandis will be integrated with the electronic National Agriculture Market (e-NAM).

▪ The Operation Green Scheme, which presently provides a subsidy on the storage and transportation of tomatoes, onions, and potatoes, will be extended to cover 22 perishable products to boost value addition and exports.

Demand for Grants 2021-22 Analysis: Agriculture and Farmers’ Welfare PRS Legislative Research

- 65 -

Allocation vs actual expenditure: Expenditure of

both the Departments has been lower than their

budget allocations in almost all years during the

period 2012-21 (Figure 2). The Ministry spent

27% less than its budget allocation in 2019-20,

primarily due to an underspending of Rs 26,286

crore (35%) in PM-KISAN (owing to coverage of

lower beneficiaries than targeted). Further, the Standing Committee on Agriculture (2016) noted

that a slow pace of fund utilisation in the first half

of the financial year results in a cut in allocation for

the rest of the year, which leads to underspending.5

Figure 2: Deviation from budgeted expenditure

Note: Figures for 2020-21 are revised estimates.


Issues in the sector

Growth of the agriculture sector

Growth of the sector comprising of agriculture and

allied activities has been volatile over the years

(Figure 3). In 2020-21, the sector is estimated to

grow at 2.3%, as compared to 4.3% in 2019-20.

Figure 3: Growth of agriculture sector (in %)

Sources: Central Statistics Office (CSO), MOSPI; PRS.

The contribution of the agriculture sector in the

economy has significantly decreased from 51% in

1951 to 19% in 2011, and further to 14.8% in 2019-

20.6 Meanwhile, the share of workers who are

dependent on agriculture has decreased at a lower

rate from 70% in 1951 to 55% in 2011. This

implies that the average income of these workers

grew at a slower pace than that of workers in other

sectors. The Committee on Doubling Farmers’

Income (Chair: Mr. Ashok Dalwai, 2017) observed

that one way of significantly improving income of

farmers is by shifting the agricultural workforce to

more productive employment in non-farm sectors.7

Figure 4: Share of agriculture in the economy

and in the total number of workers (in %)

Sources: Agricultural Statistics at a Glance 2019, Ministry of

Agriculture and Farmers’ Welfare; CSO, MOSPI; PRS.

Income support to farmers

The PM-KISAN scheme was launched in February

2019 to provide income support of Rs 6,000 per

year (disbursed in three instalments of Rs 2,000) to

farmer families with the aim of supplementing their

financial needs in procuring inputs for appropriate

crop health and yields.8

Earlier, only small and marginal landholder farmer

families, i.e., families with total cultivable

landholding of up to two hectares, were eligible for

the scheme. In May 2019, the Union Cabinet

approved the extension of the scheme to all farmer

families irrespective of their size of landholdings.

With this increase in coverage, expenditure on the

scheme was estimated to increase from the budget

allocation of Rs 75,000 crore to Rs 87,218 crore in

2019-20.9 However, in 2019-20, the Ministry spent

Rs 48,714 crore on the scheme, 35% lower than the

budget allocation. For 2020-21, the allocation has

been cut down from the budget estimate of Rs

75,000 crore to Rs 65,000 crore (revised estimate).

Implementation: Initially, the scheme was

expected to cover 12.5 crore beneficiaries.9 With

the increase in coverage, this was revised to 14.5

crore beneficiaries.9 Till January 2021, 10.75 crore

beneficiaries have been covered (received at least

one instalment) under the scheme.10 However, the

coverage under different instalments vary. In

2020-21, 10.5 crore beneficiaries have received the

first instalment (Apr-Jul), 10.2 crore beneficiaries

have received the second instalment (Aug-Nov),

and 9.5 crore beneficiaries have received the third

instalment (Dec-Mar), till February 10, 2021.11

The Standing Committee on Agriculture (2020)

noted that the scheme is facing the following issues

in implementation: (i) non-availability of proper

land records in some states, (ii) slow identification

of beneficiaries and delay in the uploading of data

by states, (iii) issues with the matching of

demographic data between the PM-KISAN

database and Aadhaar data, (iv) incorrect bank

accounts, and (v) poor internet connectivity in rural

-30%

-20%

-10%

0%

10%

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Agriculture, Cooperation and Farmers' Welfare

Agricultural Research and Education

-10%

-5%

0%

5%

10%

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10

2011

-12

2013

-14

2015

-16

2017

-18

2019

-20

0%

20%

40%

60%

80%

1951 1961 1971 1981 1991 2001 2011

Share of agriculture in the economyShare of agricultural workers in total workers


- 66 -

areas hampering the uploading of data.12 The

Committee recommended that the government

should hold regular consultation with states to

resolve issues and take corrective steps.

Land as an eligibility criterion: Farmer families

owning cultivable landholding are eligible for

receiving income support under the scheme. The

beneficiaries are identified by states based on their

land records. The scheme does not cover landless

agricultural labourers who form 55% of the

agricultural workers in the country (Figure 5).13

Agricultural workers include cultivators and

labourers working in the agriculture sector. The

share of landless agricultural labourers in total

agricultural workers has increased over the years

from 28% in 1951 to 55% in 2011. The Standing

Committee (2020) noted that tenant farmers, who

are a significant part of landless farmers in many

states, do not receive the income support benefits.12

It recommended the government to examine this issue in coordination with states so that landless

farmers can also receive benefits under the scheme.

Figure 5: Breakup of agricultural workers into

cultivators and agricultural labourers (in crore)

Sources: Agricultural Statistics at a Glance 2019, Ministry of

Agriculture and Farmers’ Welfare; PRS.

Agricultural credit

Agriculture credit is provided to farmers at a

subsidised cost through interest subsidy.14 An

interest subsidy of two percent is provided to

farmers on their short-term crop loans of up to

three lakh rupees. An additional interest subsidy of

three percent is provided to farmers repaying their

loan on time, i.e., within a year.

In 2021-22, Rs 19,468 crore has been allocated for

interest subsidy, which is 2% lower than the 2020-

21 revised estimate (Rs 19,832 crore). However, a

significant difference has been observed in the last

few years between the estimates presented in the

budget (even the revised estimate) and the actual

expenditure at the end of the year (Table 2).

Table 2: Comparison of the estimates with the

actual expenditure on interest subsidy (Rs crore)

Year Budgeted Revised Actuals % shortfall

2016-17 15,000 13,619 13,397 -11%

2017-18 15,000 14,750 13,046 -13%

2018-19 15,000 14,987 11,496 -23%

2019-20 18,000 17,863 16,219 -10%

2020-21 21,175 19,832 - -6%


Short-term vs long-term loans: In 2015, the

Committee on Medium-term Path on Financial

Inclusion under the Reserve Bank of India (RBI)

observed that the interest subsidy provided for

short-term crop loans discriminates against long-

term loans.15 Short-term crop loans are used for

pre-harvest activities such as weeding, harvesting,

sorting, and transporting. Long-term loans are

taken to invest in agricultural machinery and equipment, or irrigation system. The Committee

observed that the scheme does not incentivise long-

term capital formation in agriculture, which is

essential to boost productivity in the sector.

Over the past few decades, the trend of short-term

and long-term agricultural credit has reversed. In

1990-91, a majority of the agricultural credit were

long-term loans, whereas short-term loans were

only about a quarter of the total credit.16 In 2019-

20, the share of long-term loans in total agricultural

credit was at 40% (Figure 6).17 A lower share of long-term agricultural credit implies that farmers

are taking more loans for recurring expenditure

rather than to fund long-term investments.

Figure 6: Share of short and long-term credit

Sources: Reports of the Standing Committee on Agriculture

(2020) and the RBI Working Group on Agriculture Credit; PRS.

The Committee on Doubling Farmers’ Income

(2017) recommended that the central and state

governments should provide interest subsidy on

long-term or investment credit taken by farmers,

particularly small and marginal farmers.18 In May

2020, under the Aatmanirbhar Bharat Economic

Package, the central government announced the

setting up of an Agriculture Infrastructure Fund of

0%

20%

40%

60%

0

3

6

9

12

15

1951 1961 1971 1981 1991 2001 2011

Cultivators (LHS)

Agricultural labourers (LHS)

Proportion of agricultural labourers

0%

20%

40%

60%

80%

100%

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

Short-term credit Long-term credit


- 67 -

one lakh crore rupees for financing farm-gate

infrastructure.19 Under the scheme, the government

will provide an interest subsidy of 3% on loans of

up to two crore rupees issued under the Fund.

Land ownership: The 2015 RBI Committee on

Financial Inclusion observed that the owner of the

land is often not the cultivator, even in the case of

small and marginal holdings. For example, a

landowner may get the benefit of subsidised credit

at times and may be the moneylender to his

cultivator.20 The Committee recommended that

agricultural credit must flow to the actual cultivator

for which substantial reform is necessary.20

Further, it stated that the subsidised credit increases

the probability of misuse. The Committee on

Comprehensive Financial Services for Small

Businesses and Low-Income Households (2016)

also recommended the transfer of benefits to

farmers directly, instead of subsidy and waivers.21

Access to agricultural credit is linked to formal

land titles. An Internal Working Group of the RBI

constituted to review Agricultural Credit (2019)

noted that the absence of a proper land leasing

framework and a lack of land records restricted

access to institutional credit.22 It recommended the

central government to encourage states to digitise

and update land records in a time-bound manner.

The 2015 RBI Committee on Financial Inclusion

recommended that credit eligibility certificates,

which would act as tenancy or lease certificates,

should be issued to tenant farmers.15 These

certificates would enable landless tenant cultivators

to obtain agricultural credit.

Small and marginal farmers: Farmers with

landholdings of less than a hectare primarily

borrow from informal sources of credit such as

moneylenders, whereas those with landholdings of two or more hectares primarily borrow from banks

(Figure 7).15 Informal sources of credit are

typically offered at higher rates of interests, and

may not have proper documentation.

Note that 68% of the agricultural landholdings in

the country belong to the marginal (less than one

hectare) category.23 Another 18% belong to the

small category (between one to two hectare).

Further, the share of the marginal category in total

agricultural landholdings has been increasing over

the years, from 51% in 1970-71 to 68% in 2015-16. The RBI Internal Working Group on Agricultural

Credit (2019) noted that only 41% of the small and

marginal farmers have been covered by banks.22

Figure 7: Share of borrowings from institutional

sources across various landholders (2012-13)

Sources: Committee on Medium-term Path on Financial

Inclusion (2015), Reserve Bank of India; PRS.

Crop insurance

Crop insurance is provided to farmers under the Pradhan Mantri Fasal Bima Yojana (PMFBY).24

All farmers, including sharecroppers and tenant

farmers, who are growing notified crops in notified

areas are eligible under the scheme. In 2021-22,

the scheme has been allocated Rs 16,000 crore, a

5% increase over the 2020-21 revised estimate.

Issues faced in providing crop insurance include:

Awareness about crop insurance: The Economic

Survey 2017-18 noted that the share of agricultural

households getting their crops insured was low.25

Among households cultivating major crops, such as

rice and wheat, less than 5% of them got their crops insured. Lack of awareness about crop insurance

among farmers is a major reason for not getting

their crops insured. Lack of awareness about the

government’s crop insurance programmes is

another reason for not getting their crops insured.

Coverage of farmers: During the period 2016-19,

the scheme covered 36-40% of the farmers.26 Note

that before Kharif season 2020, enrolment was

mandatory for farmers with loans and optional for

others. To address the demand of farmers, the

scheme has been made voluntary for all farmers.27

Assessment of losses: The Standing Committee on

Agriculture (2017) observed that states are not

readily accepting and adopting the technologies

used for assessing yield loss.28 The Committee

recommended the Ministry to pursue states to adopt

technology aids and satellite imagery for crop

cutting experiments. Under the revised guidelines

of the scheme, the government has proposed a two-

step process of using weather and satellite

indicators for an early assessment of yield loss.27

Further, based on the increased efficiency seen in

the implementation of the scheme in some states,

the government has proposed the use of smart

sampling technique through satellite data by all

states for conducting crop cutting experiments.27

Grievance redressal: The Standing Committee on

Agriculture (2019) observed that farmers are facing issues in lodging complaints with the insurance

38%

65% 68% 72%79%

0%

20%

40%

60%

80%

100%

Marginal Small Semi-medium Medium Large

(<1 ha) (1-2 ha) (2-4 ha) (4-10 ha) (>10 ha)


- 68 -

companies due to the absence of local offices of the

companies at the district and block-level.26 It

recommended that the Ministry should ensure the

availability of a common helpline number for

lodging of complaints. Under the revised scheme

guidelines, states have to constitute grievance

redressal committees at the district and state level.29

Minimum Support Prices (MSPs)

MSP is the assured price announced by the central

government at which foodgrains are procured from

farmers by the central and state governments and

their agencies, for the central pool of foodgrains.30

The central pool is used for providing foodgrains

under the Public Distribution System and other welfare schemes at subsidised prices and also kept

as reserve in the form of buffer stock. The cost of

procuring from farmers at MSP and distributing

under PDS at subsidised prices is borne by the

Department of Food and Public Distribution.

However, the MSPs for all crops are decided by the

Ministry of Agriculture and Farmers’ Welfare.

MSPs are notified based on the recommendations

of the Commission for Agricultural Costs and

Prices, an attached office of the Ministry of

Agriculture and Farmers’ Welfare.31 While MSPs are annually announced for 23 crops, public

procurement is limited to a few crops such as

paddy, wheat, and, to a limited extent, pulses.

Figure 8: Percentage of crop production

procured at MSP in crop year 2019-20

Sources: Unstarred Question No. 331, Lok Sabha, September

15, 2020; PRS.

The foodgrain procurement is largely concentrated

in a few states. Three states (Madhya Pradesh,

Punjab, and Haryana) producing 46% of the wheat

in the country account for 85% of its procurement.

For rice, six states (Punjab, Telangana, Andhra

Pradesh, Chhattisgarh, Odisha, and Haryana) with

40% production have a 74% share in procurement.

According to the central government’s procurement

policy, the objective of public procurement is to ensure that farmers get remunerative prices for

their produce and do not have to resort to distress

sale.32 If farmers get a better price in comparison

to MSP, they are free to sell their produce in the

open market. The Economic Survey 2019-20

observed that the regular increase in MSP is seen

by farmers as a signal to opt for crops which have

an assured procurement system (for example, rice

and wheat).33 It also noted that this indicates

market prices do not offer remunerative options for

farmers, and MSP has, in effect, become the

maximum price that the farmers are able to realise.

Thus, MSP incentivises farmers to grow crops

which are procured by the government. As wheat

and rice are major food grains provided under the

PDS, the focus of procurement is on these crops.

This skews the production of crops in favour of

wheat and paddy (particularly in states where

procurement levels are high) and does not offer an

incentive for farmers to produce other items such as

pulses. Further, this puts pressure on the water

table as these crops are water-intensive crops.

In a report to measure the efficacy of MSPs, NITI

Aayog (2016) found that a low proportion of

farmers (10%) were aware of MSPs before the

sowing season.34 62% of the farmers were

informed of MSPs after sowing their crops. The

pricing policy of MSPs would be effective only if

farmers are aware of it at the time of deciding what

crops to grow. NITI Aayog recommended that the

awareness level of farmers regarding MSPs must

be increased and the mediums of dissemination of

this information must be strengthened. Other

issues with the implementation of the MSP regime

include long distances to the procurement centres,

increasing transportation cost for farmers, irregular

hours of the procurement centres, lack of covered

storage godowns and inadequate storage capacity,

and delays in the payment of MSPs to farmers.

Irrigation

As of 2016-17, 49% of the country’s net sown area

was under irrigation.35 The remaining agricultural

area in the country depends on rainfall. Major

irrigation sources for agriculture include tubewells

(48%) and other wells (16%), and canals (23%).

Figure 9: Sources of irrigation (2016-17)

Sources: Land Use Statistics at a Glance (2016-17), Ministry of


Sources such as canals and tubewells use the flood

irrigation technique, where water is allowed to flow

in the field and seep into the soil.36 This results in

wastage of water since excess water seeps into the

soil or flows off the surface without being utilised.

It has been recommended that farmers move from

43%

36%

12%

1%

0%

10%

20%

30%

40%

50%

Rice Wheat Pulses Coarse grains

48%

16%23%

2%

11%

0%

20%

40%

60%

Tubewells Other wells Canals Tanks Others


- 69 -

flood irrigation to micro-irrigation systems (drip or

sprinkler irrigation systems) to conserve water.37

The Pradhan Mantri Krishi Sinchai Yojana was

launched in 2015 to increase the coverage of the

area under irrigation.38 The Ministry implements

the ‘Per Drop More Crop’ component under the

scheme to increase water efficiency through micro-

irrigation and other interventions. During the

period 2013-21, 60.3 lakh hectares of area has been

covered under micro-irrigation (Table 3).39

Table 3: Area covered under micro-irrigation

in lakh hectares (as of February 12, 2021)

Year Target Achievement Achievement %

2013-14 6.6 4.3 66%

2014-15 5.7 4.3 74%

2015-16 5.0 5.7 115%

2016-17 8.0 8.4 105%

2017-18 12.0 10.5 87%

2018-19 16.0 11.6 72%

2019-20 14.0 11.7 84%

2020-21 0.0 3.7 -

Total 67.3 60.3 90%

Sources: Pradhan Mantri Krishi Sinchai Yojana website; PRS.

Shortfall in funds: In 2021-22, the scheme has

been allocated Rs 4,000 crore, which is 56% higher

than the 2020-21 revised estimate. Though the

budget allocation to the scheme seems higher than

the previous year, it is usually cut down at the

revised stage, resulting in a lower expenditure than

the allocation (Table 4). Allocation to the scheme

for 2020-21 has been revised down by 36% from

Rs 4,000 crore to Rs 2,563 crore (revised estimate).

Table 4: Comparison of the allocation to the scheme with its actual expenditure (in Rs crore)

Year Allocation* Expenditure % shortfall

2015-16 1,800 1,556 14%

2016-17 2,340 1,991 15%

2017-18 3,400 2,819 17%

2018-19 4,000 2,918 27%

2019-20 3,500 2,700 23%

2020-21 4,000 2,563# 36%

Note: *Budget estimate; #Revised estimate used as expenditure.


Soil health and fertilisers

While the Ministry of Chemicals and Fertilisers is

responsible for monitoring the production,

distribution, and prices of fertilisers, the Ministry

of Agriculture and Farmers’ Welfare is responsible

for the promotion of balanced use of fertilisers.40

Balanced use refers to the use of a proper

combination of various nutrients and other micro-

nutrients. Three major nutrients are primarily used:

Nitrogen (N), Phosphatic (P), and Potassic (K).

The government subsidises fertilisers through: (i)

subsidy for urea (containing N fertiliser), and (ii)

nutrient-based subsidy for P and K fertilisers. The

fertiliser subsidy is provided to the fertiliser

manufacturers and importers so that farmers can

directly buy them at affordable or subsidised prices.

In 2021-22, Rs 79,530 crore has been allocated to

the Department of Fertilisers for fertiliser subsidy,

an annual decrease of 1% over 2019-20 (Table 5).

Table 5: Fertiliser subsidy allocation (Rs crore)

Subsidy 2019-20 Actuals

2020-21 Revised

2021-22 Budgeted

% change (annualised) in 2021-22

over 2019-20

Urea 54,755 94,957 58,768 3.6%

Nutrient based

26,369 38,990 20,762 -11.3%

Total 81,124 1,33,947 79,530 -1.0%


In November 2020, under the Aatmanirbhar Bharat

Economic Package, the government announced an

additional allocation of Rs 65,000 crore in 2020-21

for fertiliser subsidy.41 As a result, the allocation

for 2020-21 has increased from Rs 71,309 crore at

the budgeted stage to Rs 1,33,947 crore at the

revised stage. Note that in March 2020, the

Standing Committee on Chemicals and Fertilisers

had recommended that the Ministry should be

provided a one-time allocation to clear off all the

pending fertiliser subsidy dues owed to companies,

as the 2020-21 budget allocation is insufficient for

this purpose.42 The Committee observed that as of

February 2020, the Ministry owed Rs 43,483 crore as dues to companies, which could not be paid in

previous years due to insufficient budget allocation.

The Standing Committee (2020) observed that

many fertiliser manufacturing plants are operating

with very old technology and systems, and not at

their highest efficiency.43 The government bears

the cost of their inefficiency in the form of higher

subsidy. The Committee recommended that the

companies should be set free to manufacture and

sell fertilisers as per their own system. A farmer

should have the choice to buy from various brands

of fertilisers while getting the subsidy directly in his bank account. This will push manufacturers to

produce and sell their fertilisers in the most cost-

effective manner and push the inefficient ones out.

It recommended that the government should set out

a clear and firm roadmap for switching to a direct

subsidy system, where the manufacturing and

importing of fertilisers is set free to market forces.

Prices of urea are controlled by the government,

whereas that of P and K fertilisers are market-

driven.40 This has led to lower prices of urea (N)

over the years, whereas the market prices of P and K fertilisers have remained higher. This is one of


- 70 -

the reasons for imbalanced use of nutrients as urea

is used more than other fertilisers.40 While the ratio

recommended for use of the N, P, and K fertilisers

is 4:2:1, the ratio was 6.3:2.5:1 in 2018-19.44 Table

9 in the Annexure shows their consumption trend.

Overuse of fertilisers could lead to an imbalance of

nutrients in the soil and deteriorate its quality. The

Standing Committee on Agriculture (2015)

observed that use of fertilisers in the country was

not based on scientific analysis of soil due to near

absence of soil testing facilities, low awareness,

and over-reliance on urea.45

Soil Health Cards: In order to provide farmers

with information regarding the quality of their soil, the Soil Health Card scheme was launched in

2015.46 Under the scheme, farmers are issued soil

health cards, which contain information such as

nutrient status of soil and recommended dose of

nutrients to be provided to improve its fertility.

In 2021-22, Rs 315 crore has been allocated for the

National Project on Soil Health and Fertility, a 41%

increase over the 2020-21 revised estimate. During

the first cycle (2015-17) of the scheme, 10.74 crore

soil health cards were provided as per the target.47

During the second cycle (2017-19), 11.87 crore soil health cards were provided against the target of

12.54 crore cards. During the period 2019-21, 18.9

lakh soil health cards have been distributed under

the Model Village Programme (82% of the target).

Rashtriya Krishi Vikas Yojana

The umbrella scheme was initiated in 2007 for ensuring holistic development of agriculture and

allied sectors by allowing states to choose their

own development activities as per district and state

agriculture plans.48 With the aim of making

farming a remunerative economic activity, the

Ministry provides financial assistance to states to

spend on sub-schemes such as: (i) pre-harvest and

post-harvest infrastructure, (ii) value addition using

agri-business models, and (iii) projects based on

local and national priorities.

In 2021-22, Rs 3,712 crore has been allocated to the scheme, a 46% increase over the revised

estimate of 2020-21. The Standing Committee on

Agriculture (2017) observed that the allocations for

the scheme are not utilised optimally and timely.49

This is due to a delay in the approval of projects

and funds by states and consequent slow pace of

implementation, causing a reduction in the release

of funds. For instance, in 2020-21, Rs 3,700 crore

was allocated to the scheme, which has been cut by

31% at the revised stage to Rs 2,551 crore.


noted that the scheme’s allocation gets cut at the revised stage as states are not able to timely submit

their utilisation certificates, due to the delays in

completion of infrastructure projects.12 It

recommended that there is a need to increase the

time period for submission of utilisation certificates

for schemes involving infrastructure projects.

Horticulture

Between 2001-02 and 2019-20, the production of

horticulture crops increased from 146 million

tonnes to 320 million tonnes (Figure 10).50 This

implies that the horticulture production increased at

an average rate of 4.5%. Production of food grains

increased at a rate of 1.9% during the same period.

Figure 10: Comparison of horticulture and food

grain production during 2001-20 (million tonne)

Sources: Directorate of Economics and Statistics, Ministry of


In 2019-20, fruits and vegetables are estimated to

contribute to 31% and 60% of the total horticultural

production, respectively.51 The National Mission on Horticulture seeks to promote horticulture by

providing availability of quality inputs such as

planting material, and post-harvest interventions

such as reduction in losses and access to markets.

In 2021-22, the scheme has been allocated Rs 2,385

crore, 48% more than the 2020-21 revised estimate.

However, over the past few years, the actual

expenditure on the scheme has been lower than the

allocation made in the budget (Table 6).

Table 6: Comparison of the allocation to the

scheme with its actual expenditure (in Rs crore)

Year Allocation* Expenditure % shortfall

2016-17 1,620 1,493 8%

2017-18 2,320 2,027 13%

2018-19 2,536 1,997 21%

2019-20 2,225 1,331 40%

2020-21 2,300 1,610# 30%

Note: *Budget estimate; #Revised estimate used as expenditure.


Agricultural Marketing

The Integrated Scheme on Agriculture Marketing

includes sub-schemes such as: (i) agriculture

marketing infrastructure, to create storage capacity

and farmer consumer markets, (ii) market research

and information network, (iii) strengthening of

Agmark grading facilities, (iv) agro-business

0

100

200

300

400

2001

-02

2003

-04

2005

-06

2007

-08

2009

-10

2011

-12

2013

-14

2015

-16

2017

-18

2019

-20

Horticulture Foodgrains


- 71 -

development to provide market linkages to farmers,

and (v) e-NAM (National Agriculture Market),

which is a national electronic market platform on

which farmers can sell their produce.

In 2021-22, the scheme has been allocated Rs 410

crore. This is 17% higher than the 2020-21 revised

estimate. However, the allocation for 2020-21 has

been revised down by 29%, from Rs 490 crore to

Rs 350 crore. Till January 24, 2021, 1,000 mandis

across 18 states and three union territories have

been integrated with e-NAM.52

Regulation: Agriculture markets in most states are

regulated by the Agriculture Produce Marketing

Committees (APMCs) established by the state governments. APMCs were set up to ensure fair

trade between buyers and sellers for effective price

discovery of farmers’ produce.53 APMCs can: (i)

regulate the trade of farmers’ produce by providing

licenses to buyers, commission agents, and private

markets, (ii) levy market fees or any other charges

on trade, and (iii) provide necessary infrastructure

within their markets to facilitate the trade.


observed that the APMC laws are not implemented

in their true sense and need urgent reforms.53 Issues identified by the Committee include: (i)

most APMCs have a limited number of traders

operating, which leads to cartelization and reduces

competition, and (ii) undue deductions in the form

of commission charges and market fees.53 Traders,

commission agents, and other functionaries

organise themselves into associations, which do not

allow easy entry of new persons into market yards,

stifling competition.54 The Acts are highly

restrictive in promotion of multiple channels of

marketing and competition in the system.53

Parliament enacted three laws in September 2020: (i) the Farmers’ Produce Trade and Commerce

(Promotion and Facilitation) Act, 2020, (ii) the

Farmers (Empowerment and Protection)

Agreement on Price Assurance and Farm Services

Act, 2020, and (iii) the Essential Commodities

(Amendment) Act, 2020.55,56,57 These laws

collectively seek to (i) facilitate barrier-free trade

of farmers’ produce outside the markets notified

under the various state APMC laws, (ii) define a

framework for contract farming, and (iii) impose

stock limits on agricultural produce only if there is

a sharp increase in retail prices. The three laws

together aim to increase opportunities for farmers

to enter into sale contracts, increase the availability

of buyers, and permit buyers to purchase bulk

produce. However, following protests against the

laws, in January 2021, the Supreme Court stayed

their implementation until further orders.58

Marketing infrastructure: The Standing

Committee on Agriculture (2019) noted that the

availability of a transparent, easily accessible, and

efficient marketing platform is a pre-requisite to

ensure remunerative prices for farmers.53 Most

farmers lack access to government procurement

facilities and APMC markets.53 Small and

marginal farmers (who hold 86% of the agricultural landholdings in the country) face various issues in

selling their produce in APMC markets such as

inadequate marketable surplus, long-distance to the

nearest APMC markets, and lack of transportation

facilities.53 The average area served by an APMC

market is 496 sq. km., much higher than the 80 sq.

km. recommended by the National Commission on

Farmers (Chair: Dr. M. S. Swaminathan) in 2006.53

The Standing Committee (2019) noted that Gramin

Haats (small rural markets) can emerge as a viable

alternative for agricultural marketing if they are

provided with adequate infrastructure facilities.53 It recommended that the Gramin Agricultural

Markets scheme (which aims to improve

infrastructure and civic facilities in 22,000 Gramin

Haats across India) should be made a fully funded

central scheme and scaled to ensure the presence of

a Haat in each panchayat of the country.53

The central government has proposed development

of basic infrastructure in Gramin Haats through the

MGNREGS and of marketing infrastructure

through the Agri-Market Infrastructure Fund.59

The Fund will be set up by NABARD to provide Rs 1,000 crore to states at a concessional interest

rate for development of marketing infrastructure in

Gramin Haats. In the 2021-22 budget, the

government has proposed that the Agriculture

Infrastructure Fund will be made available to

APMCs for augmenting infrastructure facilities.60

It has also proposed the levy of an Agriculture and

Infrastructure Development Cess, which will be

used to generate funds for financing agricultural

infrastructure and other development activities. It

will be levied on petrol, diesel, and imports such as

cotton, coal, gold, silver, and alcoholic beverages.

Agricultural Research

The Indian Council of Agricultural Research

(ICAR) has been allocated Rs 5,322 crore for the

year 2021-22, which is 7% higher than the revised

estimate of 2020-21. The allocation is primarily

for salaries, pensions, administrative expenses, and

different schemes under ICAR. The Standing

Committee on Agriculture (2019) noted that almost

75% of the allocation to the Department of

Agricultural Research and Education is incurred on

items such as salaries and pensions, and only 25%

is available for research activities.61


- 72 -

The Committee recommended that more funds

should be provided to the Department to promote

agricultural research and education. It also

recommended the Department to work towards

attracting Corporate Social Responsibility (CSR)

funds for investment in agricultural research.

Research under crop sciences and animal sciences

has been allocated Rs 968 crore and Rs 462 crore in

2021-22, respectively. Observing that vegetable

oils, pulses, cashew are among the major import

commodities between 2011 and 2016, the Standing

Committee on Agriculture (2017) recommended

that there is a need for enhancing the production of

these commodities.62 It also recommended the

government to allocate additional funds to ICAR

for this purpose. It also noted that the production

of animal vaccines is inadequate in the country. It

recommended that adequate resources and

manpower must be devoted to ICAR for the

development of animal vaccines.

1 Ministry-wise Summary of Budget Provisions, Union Budget

2021-22, https://www.indiabudget.gov.in/doc/eb/sumsbe.pdf. 2 Demand No. 1, Department of Agriculture, Cooperation and

Farmers’ Welfare, Expenditure Budget, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe1.pdf. 3 Uncorrected Verbatim Debates, Rajya Sabha, February 12,

2021, http://164.100.47.7/newdebate/253/12022021/Fullday.pdf. 4 Demand No. 2, Department of Agricultural Research and

Education, Expenditure Budget, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/sbe2.pdf. 5 Report no. 25, Standing Committee on Agriculture: ‘Demand

for Grants (2016-17), Department of Agriculture, Cooperation

International comparison: The Committee on

Doubling Farmers’ Income (Chair: Mr. Ashok

Dalwai, 2017) observed that the expenditure on

agricultural research in India has remained around

0.3-0.4% of the agriculture GDP since 2001

(except in 2011 when it was 0.52% because of

higher plan allocations by the government).63

The Committee observed that this is substantively

lower in comparison to many developed countries,

and also vis-à-vis comparable developing

economies. The share of agricultural research in

agriculture GDP is much higher in Brazil (1.8%),

Mexico (1.05%), Malaysia (0.99%), and China

(0.62%).

It observed that in the high-income countries, the

share stands at 3.01%. The Committee

recommended that expenditure on agricultural

research should be increased to up to one percent of

agriculture GDP.

and Farmers’ Welfare’, Lok Sabha, May 2016,

http://164.100.47.193/lsscommittee/Agriculture/16_Agriculture_

25.pdf. 6 “Press Note on First Revised Estimates of National Income for

2019-20”, Ministry of Statistics and Programme

Implementation, January 29, 2021,

https://www.mospi.gov.in/documents/213904//416359//PressNo

te_FRE%202019-20%20-

%20Website1611922195016.pdf//5efc1a5e-1e8f-29ec-4f34-

d58ebd438ea3. 7 “Status of Farmers’ Income: Strategies for Accelerated

Growth”, Report of the Committee on Doubling Farmers’

15th Finance Commission’s grants for agricultural reforms

The 15th Finance Commission, in its report for the period 2021-26, has recommended a total of Rs 45,000 crore as performance-based grants for states implementing agricultural reforms. It has identified four areas (with equal weightage) where states need to carry out reforms to be eligible for their share under these performance-based grants. These four areas are:

Land leasing: States are required to create legal provisions for liberalisation and recognition of agricultural land lease. The instances of leasing of agricultural land are rising but since these agreements are largely informal, the tenant is not recognised by the law. They are also not eligible for benefits under various government schemes. The 15th Finance Commission has recommended states to amend their land-related laws (on the lines of NITI Aayog's Model Agricultural Land Leasing Act, 2016) to allow short-term and long-term lease of agricultural land for agricultural purpose, agro-industry, logistics for agricultural trade, and supply chains.

Sustainable and efficient water use: States are required to maintain and augment groundwater stock and check the fall in the water table. Despite groundwater levels falling at an alarming rate, agricultural policies encourage profligate use of water and the sector uses about 90% of the total water used in the country. The 15th Finance Commission has recommended three measures which states can adopt to reduce water use in agriculture: (i) replacing free/ subsidised power supply with direct benefit transfers to facilitate judicious use of water and a shift from water-guzzling crops, (ii) encouraging new technologies, such as drip, sprinkler, and sensor-based irrigation, for efficient use, and (iii) conserving and harvesting rainwater to increase the availability of water.

Export promotion: States are required to increase exports in the agriculture sector. India exports 7% of its domestic production. Despite being the second-highest agricultural producer in the world, India's share in the global market is just 2.5%. An Expert Group constituted by the 15th Finance Commission has recommended various measures to increase agricultural exports, including: (i) focusing on certain crop value chains with high export potential, (ii) supporting these value chains through a cluster approach and preparing comprehensive plans to develop these clusters, and (iii) reducing logistics’ cost to make exports more competitive.

Contribution towards Aatmanirbhar Bharat: States are required to increase the production of oilseeds, pulses, and wood and wood products. These grants aim to make India self-reliant in the production of these commodities where there is a sizeable deficit. The Green Revolution, focusing on wheat and rice, created a strong disadvantage for production of pulses and oilseeds. The per capita domestic availability of pulses declined from 69 gm per person per day in 1961 to less than 55 gm in recent years, leading to under-nutrition and malnutrition. More than 60% of the domestic demand for vegetable oil is met from imports, valued at Rs 69,000 crore. Similarly, 40% of the non-fuel timber requirement is met from imported wood and wood products, valued at Rs 42,000 crore.

https://www.indiabudget.gov.in/doc/eb/sumsbe.pdf


http://164.100.47.7/newdebate/253/12022021/Fullday.pdf


http://164.100.47.193/lsscommittee/Agriculture/16_Agriculture_25.pdf


https://www.mospi.gov.in/documents/213904/416359/PressNote_FRE%202019-20%20-%20Website1611922195016.pdf/5efc1a5e-1e8f-29ec-4f34-d58ebd438ea3





- 73 -

Income, Ministry of Agriculture and Farmers Welfare, August

2017,

http://farmer.gov.in/imagedefault/DFI/DFI%20Volume%202.pd

f. 8 Operational Guidelines of “Pradhan Mantri Kisan Samman

Nidhi (PM-KISAN)”, Ministry of Agriculture and Farmers

Welfare,

http://agricoop.gov.in/sites/default/files/operational_GuidePM.p

df. 9 “PM-KISAN Scheme extension to include all eligible farmer

families irrespective of the size of landholdings”, Press

Information Bureau, Cabinet, May 31, 2019. 10 Rajya Sabha Starred Question No. 60, Ministry of Agriculture

and Farmers’ Welfare, February 5, 2021,

https://pqars.nic.in/annex/253/AS60.pdf. 11 PM-KISAN scheme dashboard, Ministry of Agriculture and

Farmers’ Welfare, as on February 10, 2021,

https://pmkisan.gov.in/. 12 Report no. 9, Standing Committee on Agriculture: ‘Demand


and Farmers’ Welfare’, Lok Sabha, March 2020,


9.pdf. 13 “March of Agriculture since Independence and Growth

Trends”, Report of the Committee on Doubling Farmers’

Income, Ministry of Agriculture and Farmers Welfare, August

2017,

http://farmer.gov.in/imagedefault/DFI/DFI%20Volume%201.pd

f. 14 “Cabinet approves Interest Subvention to banks on short-Term

crop loans to farmers”, Press Information Bureau, Ministry of

Agriculture and Farmers’ Welfare, June 14, 2017. 15 Report of the Committee on Medium-term Path on Financial

Inclusion, Reserve Bank of India, December 2015,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FFIRA27

F4530706A41A0BC394D01CB4892CC.PDF. 16 Report of the Internal Working Group to Revisit the Existing

Priority Sector Lending Guidelines, Reserve Bank of India,

March 2, 2015,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/PSGRE0

20315.pdf. 17 Report no. 19, Standing Committee on Agriculture: Action

taken by the government on the report: ‘Demand for Grants

(2020-21), Department of Agriculture, Cooperation and

Farmers’ Welfare’, Lok Sabha, February 2021,


19.pdf. 18 “Input Management for Resource Use Efficiency and Total

Factor Productivity”, Report of the Committee on Doubling

Farmers’ Income, Volume 7, Ministry of Agriculture and

Farmers’ Welfare, March 2018,

https://farmer.gov.in/imagedefault/DFI/DFI%20Volume%207.p

df. 19 “Setting up of Agriculture Infrastructure Fund”, Press

Information Bureau, Ministry of Agriculture and Farmers’

Welfare, September 18, 2020. 20 Report of the Committee on Medium-term Path on Financial

Inclusion, Reserve Bank of India, December 2015,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FFIRA27

F4530706A41A0BC394D01CB4892CC.PDF. 21 Committee on Comprehensive Financial Services for Small

Businesses and Low-Income Households, Reserve Bank of

India, January 2016,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CFS0701

14RFL.pdf. 22 Report of the Internal Working Group to Review Agricultural

Credit, Reserve Bank of India, September 2019,

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/WGREP

ORT101A17FBDC144237BD114BF2D01FF9C9.PDF. 23 Agriculture Census 2015-16 (provisional), Ministry of

Agriculture and Farmers Welfare, September 2018,

https://agcensus.nic.in/document/agcen1516/T1_ac_2015_16.pd

f. 24 “Pradhan Mantri Fasal Bima Yojana (PMFBY), Ministry of

Agriculture,

http://agricoop.nic.in/imagedefault/whatsnew/sch_eng.pdf;

“Cabinet approves New Crop Insurance Scheme – Pradhan

Mantri Fasal Bima Yojana”, Press Information Bureau, Ministry

of Agriculture, January 13, 2016. 25 Agriculture and Food Management, Economic Survey 2017-

18, January 2018,

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/099-

119_Chapter_07_Economic_Survey_2017-18.pdf. 26 Report no. 6, Standing Committee on Agriculture: ‘Demand


and Farmers’ Welfare’, Lok Sabha, December 2019,


6.pdf. 27 Lok Sabha Unstarred Question No. 97, Ministry of

Agriculture and Farmers’ Welfare, February 2, 2021,

http://164.100.24.220/loksabhaquestions/annex/175/AU97.pdf. 28 Report no. 35, Standing Committee on Agriculture: ‘Demand


and Farmers’ Welfare’, Lok Sabha, March 2017,


35.pdf. 29 Report no. 17, Standing Committee on Agriculture: Action

taken by the government on the report: ‘Demand for Grants

(2019-20), Department of Agriculture, Cooperation and

Farmers’ Welfare’, Lok Sabha, February 2021,


17.pdf. 30 The National Food Security Act, 2013, India Code, Ministry

of Law and Justice, as on September 16, 2020,

https://www.indiacode.nic.in/bitstream/123456789/2113/1/2013

20.pdf. 31 Commission for Agricultural Costs and Prices, Ministry of

Agriculture and Farmers’ Welfare,

https://cacp.dacnet.nic.in/content.aspx?pid=32. 32 Procurement policy, Department of Food and Public

Distribution, https://dfpd.gov.in/Procurement-Policy.htm. 33 Economic Survey 2019-20, Chapter 4, Volume 1, January

2020, https://www.indiabudget.gov.in/budget2020-

21/economicsurvey/doc/vol1chapter/echap04_vol1.pdf. 34 Evaluation Report on Efficacy of Minimum Support Prices

(MSPs), NITI Aayog, January 2016,

http://www.niti.gov.in/writereaddata/files/document_publication

/MSP-report.pdf. 35 Land Use Statistics at a Glance, Directorate of Economics and

Statistics, Ministry of Agriculture and Farmers’ Welfare, as on

February 1, 2021, https://eands.dacnet.nic.in/LUS_2016-

17/final%20lus%202007-08%20to%202016-17.xls. 36 “Agriculture: More from less”, Economic Survey 2015-16,

http://unionbudget.nic.in/es2015-16/echapvol1-04.pdf. 37 Natural Resource Management, State of Indian Agriculture

2015-16, Ministry of Agriculture and Farmers’ Welfare, May

2016, http://agricoop.nic.in/imagedefault/state_agri_1516.pdf. 38 State of Indian Agriculture 2015-16, Ministry of Agriculture

and Farmers Welfare,

http://eands.dacnet.nic.in/PDF/State_of_Indian_Agriculture,201

5-16.pdf. 39 Website of the Pradhan Mantri Krishi Sinchai Yojana,

Ministry of Agriculture and Farmers’ Welfare, as on February

12, 2021, https://pmksy.gov.in/mis/frmDashboard.aspx. 40 Report no. 43, Standing Committee on Chemicals and

Fertilisers: ‘Demand for Grants (2018-19), Department of

Fertilisers’, Lok Sabha, March 2018,

http://164.100.47.193/lsscommittee/Chemicals%20&%20Fertili

zers/16_Chemicals_And_Fertilizers_43.pdf. 41 “Presentation of details under Aatmanirbhar Bharat Package

3.0 to support Indian economy in fight against COVID-19 as

announced by Union Finance & Corporate Affairs Minister Smt.

http://farmer.gov.in/imagedefault/DFI/DFI%20Volume%202.pdf


http://agricoop.gov.in/sites/default/files/operational_GuidePM.pdf

http://agricoop.gov.in/sites/default/files/operational_GuidePM.pdf

https://pqars.nic.in/annex/253/AS60.pdf

https://pmkisan.gov.in/





https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FFIRA27F4530706A41A0BC394D01CB4892CC.PDF


https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/PSGRE020315.pdf

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/PSGRE020315.pdf



https://farmer.gov.in/imagedefault/DFI/DFI%20Volume%207.pdf

https://farmer.gov.in/imagedefault/DFI/DFI%20Volume%207.pdf



https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CFS070114RFL.pdf

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CFS070114RFL.pdf

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/WGREPORT101A17FBDC144237BD114BF2D01FF9C9.PDF

https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/WGREPORT101A17FBDC144237BD114BF2D01FF9C9.PDF

https://agcensus.nic.in/document/agcen1516/T1_ac_2015_16.pdf

https://agcensus.nic.in/document/agcen1516/T1_ac_2015_16.pdf

http://agricoop.nic.in/imagedefault/whatsnew/sch_eng.pdf

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/099-119_Chapter_07_Economic_Survey_2017-18.pdf

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/099-119_Chapter_07_Economic_Survey_2017-18.pdf








https://www.indiacode.nic.in/bitstream/123456789/2113/1/201320.pdf

https://www.indiacode.nic.in/bitstream/123456789/2113/1/201320.pdf

https://cacp.dacnet.nic.in/content.aspx?pid=32

https://dfpd.gov.in/Procurement-Policy.htm



http://www.niti.gov.in/writereaddata/files/document_publication/MSP-report.pdf

http://www.niti.gov.in/writereaddata/files/document_publication/MSP-report.pdf

https://eands.dacnet.nic.in/LUS_2016-17/final%20lus%202007-08%20to%202016-17.xls

https://eands.dacnet.nic.in/LUS_2016-17/final%20lus%202007-08%20to%202016-17.xls

http://unionbudget.nic.in/es2015-16/echapvol1-04.pdf

http://agricoop.nic.in/imagedefault/state_agri_1516.pdf

http://eands.dacnet.nic.in/PDF/State_of_Indian_Agriculture,2015-16.pdf

http://eands.dacnet.nic.in/PDF/State_of_Indian_Agriculture,2015-16.pdf

https://pmksy.gov.in/mis/frmDashboard.aspx

http://164.100.47.193/lsscommittee/Chemicals%20&%20Fertilizers/16_Chemicals_And_Fertilizers_43.pdf



- 74 -

Nirmala Sitharaman”, Press Information Bureau, Ministry of

Finance, November 12, 2020,

https://static.pib.gov.in/WriteReadData/userfiles/MOF.pdf. 42 Report no. 7, Standing Committee on Chemicals and

Fertilisers: ‘Demand for Grants (2020-21), Department of

Fertilisers’, Lok Sabha, March 2020,


zers/17_Chemicals_And_Fertilizers_7.pdf. 43 Report no. 5, Standing Committee on Chemicals and

Fertilisers: ‘Study of System of Fertiliser Subsidy’, Lok Sabha,

March 2020,


zers/17_Chemicals_And_Fertilizers_5.pdf. 44 Agricultural Statistics at a Glance 2019, Ministry of

Agriculture and Farmers’ Welfare, March 2020,

https://eands.dacnet.nic.in/PDF/At%20a%20Glance%202019%2

0Eng.pdf. 45 Report no. 29, Standing Committee on Agriculture: ‘Impact of

Chemical Fertilizers and Pesticides on Agriculture and allied

sectors in the country’, August 2016,


29.pdf. 46 “Soil health card Scheme Completes 5 years on 19-2-2020”,

Press Information Bureau, Ministry of Agriculture and Farmers’

Welfare, February 17, 2020. 47 Website of the Soil Health Card scheme, Ministry of

Agriculture and Farmers’ Welfare, as on February 12, 2021,

https://www.soilhealth.dac.gov.in/. 48 Revised guidelines, Rashtriya Krishi Vikas Yojana,

Department of Agriculture, Cooperation and Farmers’ Welfare,

https://rkvy.nic.in/static/download/pdf/RKVY_14th_Fin._Com

m.pdf. 49 Report no. 35, Standing Committee on Agriculture: ‘Demand


and Farmers’

Welfare’, Lok Sabha, March 2017,


35.pdf. 50 Horticulture Statistics at a Glance 2017, Ministry of

Agriculture and Farmers’ Welfare,

http://agricoop.gov.in/sites/default/files/Horticulture%20At%20

a%20Glance%202017%20for%20net%20uplod%20%282%29.p

df. 51 Second Advance Estimates of Horticultural Production in

2019-20, Ministry of Agriculture and Farmers’ Welfare,

http://agricoop.nic.in/sites/default/files/2019-

20%282nd%20Advance%20Estimates%29%20%281%29.pdf. 52 Lok Sabha Starred Question No. 20, Ministry of Agriculture

and Farmers’ Welfare, February 2, 2021,

http://164.100.24.220/loksabhaquestions/annex/175/AS20.pdf.

53 Report No. 62, Standing Committee on Agriculture (2018-19):

‘Agriculture Marketing and Role of Weekly Gramin Haats’, Lok

Sabha, January 3, 2019,


62.pdf. 54 Report of Committee of State Ministers, In-charge of

Agriculture Marketing to Promote Reforms, January 2013,

https://dmi.gov.in/Documents/stminprreform.pdf. 55 The Farmers’ Produce Trade and Commerce (Promotion and

Facilitation) Act, 2020, Gazette of India, Ministry of Agriculture

and Farmers’ Welfare, September 27, 2020,

http://www.egazette.nic.in/WriteReadData/2020/222039.pdf. 56 The Essential Commodities (Amendment) Act, 2020, Gazette

of India, Ministry of Consumer Affairs, Food and Public

Distribution, September 27, 2020,

http://www.egazette.nic.in/WriteReadData/2020/222038.pdf. 57 The Farmers (Empowerment and Protection) Agreement on

Price Assurance and Farm Services Act, 2020, Gazette of India,

Ministry of Agriculture and Farmers’ Welfare, September 27,

2020,

http://www.egazette.nic.in/WriteReadData/2020/222040.pdf. 58 Order dated January 12, 2021, Rakesh Vaishnav vs Union of

India, W.P.(C) No. 1118/2020, Supreme Court of India,

https://main.sci.gov.in/supremecourt/2020/21097/21097_2020_3

1_19_25372_Order_12-Jan-2021.pdf. 59 Report No. 8, Standing Committee on Agriculture (2019-20):

Action taken by the government on the report ‘Agriculture

Marketing and Role of Weekly Gramin Haats’, Lok Sabha,

December 12, 2019,


8.pdf. 60 Budget Speech, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 61 Report no. 3, Standing Committee on Agriculture: ‘Demand

for Grants (2019-20), Department of Agricultural Research and

Education’, Lok Sabha, December 2019,


3.pdf. 62 Report no. 36, Standing Committee on Agriculture: ‘Demand

for Grants (2017-18), Department of Agricultural Research and

Education’, Lok Sabha, March 2017,


36.pdf. 63 “Science for Doubling Farmers’ Income”, Report of the

Committee on Doubling Farmers’ Income, Ministry of

Agriculture and Farmers Welfare, February 2018,

http://farmer.gov.in/imagedefault/DFI/DFI%20Vol-12A.pdf.

https://static.pib.gov.in/WriteReadData/userfiles/MOF.pdf





https://eands.dacnet.nic.in/PDF/At%20a%20Glance%202019%20Eng.pdf

https://eands.dacnet.nic.in/PDF/At%20a%20Glance%202019%20Eng.pdf



https://www.soilhealth.dac.gov.in/

https://rkvy.nic.in/static/download/pdf/RKVY_14th_Fin._Comm.pdf

https://rkvy.nic.in/static/download/pdf/RKVY_14th_Fin._Comm.pdf



http://agricoop.gov.in/sites/default/files/Horticulture%20At%20a%20Glance%202017%20for%20net%20uplod%20%282%29.pdf



http://agricoop.nic.in/sites/default/files/2019-20%282nd%20Advance%20Estimates%29%20%281%29.pdf

http://agricoop.nic.in/sites/default/files/2019-20%282nd%20Advance%20Estimates%29%20%281%29.pdf




https://dmi.gov.in/Documents/stminprreform.pdf

http://www.egazette.nic.in/WriteReadData/2020/222039.pdf



https://main.sci.gov.in/supremecourt/2020/21097/21097_2020_31_19_25372_Order_12-Jan-2021.pdf

https://main.sci.gov.in/supremecourt/2020/21097/21097_2020_31_19_25372_Order_12-Jan-2021.pdf








http://farmer.gov.in/imagedefault/DFI/DFI%20Vol-12A.pdf


- 75 -

Annexure

Allocation to major expenditure heads under the Departments Table 7: Allocation under the Department of Agriculture, Cooperation and Farmers’ Welfare (Rs crore)

2019-20 Actuals

2020-21 Budgeted

2020-21 Revised

% change in RE 2020-21 over BE 2020-21

2021-22 Budgeted

% change (annualised) in BE 2021-22 over

2019-20

PM-KISAN 48,714 75,000 65,000 -13% 65,000 16%

Interest subsidy for short-term credit to farmers

16,219 21,175 19,832 -6% 19,468 10%

Pradhan Mantri Fasal Bima Yojana 12,639 15,695 15,307 -2% 16,000 13%

Pradhan Mantri Krishi Sinchai Yojana (Per Drop More Crop)

2,700 4,000 2,563 -36% 4,000 22%

Market Intervention Scheme and Price Support Scheme (MIS-PSS) *

2,005 2,000 996 -50% 1,501 -13%

Agriculture Infrastructure Fund - - 208 - 900 -

Formation and Promotion of 10,000 Farmer Producer Organisations

- 500 250 -50% 700 -

Green Revolution 9,895 13,320 10,474 -21% 13,408 16%

Rashtriya Krishi Vikas Yojana 3,085 3,700 2,551 -31% 3,712 10%

National Mission on Horticulture 1,331 2,300 1,610 -30% 2,385 34%

National Food Security Mission 1,769 2,100 1,864 -11% 2,096 9%

Department 94,252 1,34,400 1,16,758 -13% 1,23,018 14%

*for procurement of pulses and oilseeds

Sources: Demand no. 1, Expenditure Budget, Union Budget 2021-22; PRS.

Table 8: Allocation under the Department of Agricultural Research and Education (Rs crore)

2019-20 Actuals

2020-21 Budgeted

2020-21 Revised

% change in RE

2020-21 over BE 2020-21

2021-22 Budgeted


in BE 2021-22 over 2019-20

ICAR headquarters 4,869 5,138 4,997 -3% 5,322 5%

Crop sciences 859 965 836 -13% 968 6%

Agricultural education 688 740 530 -28% 613 -6%

Central agricultural universities 459 460 429 -7% 471 1%

Animal sciences 452 486 420 -14% 462 1%

Department 7,523 8,363 7,762 -7% 8,514 6%

Sources: Demand no. 2, Expenditure Budget, Union Budget 2021-22; PRS.

Consumption of Fertilisers Table 9: Consumption of fertilisers in terms of N, P, and K nutrients (in lakh tonnes)

Year Urea (N) Phosphatic (P) Potassic (K) Total (N+P+K)

2006-07 137.7 55.4 23.3 216.5

2007-08 144.2 55.1 26.4 225.7

2008-09 150.9 65.1 33.1 249.1

2009-10 155.8 72.7 36.3 264.9

2010-11 165.6 80.5 35.1 281.2

2011-12 173.0 79.1 25.8 277.9

2012-13 168.2 66.5 20.6 255.4

2013-14 167.5 56.3 21.0 244.8

2014-15 169.4 60.9 25.3 255.8

2015-16 173.7 69.8 24.0 267.5

2016-17 167.4 67.1 25.1 259.5

2017-18 169.6 68.5 27.8 265.9

2018-19 176.3 69.7 27.8 273.8

Sources: Agricultural Statistics at a Glance 2019, Ministry of Agriculture and Farmers’ Welfare; PRS.

- 76 -

Demand for Grants: Road Transport

and Highways

The Ministry of Road Transport and Highways

formulates and administers policies for road transport, and transport research. It is also involved

with the construction and maintenance of the

National Highways (NHs) through the National

Highways Authority of India (NHAI), and the

National Highways and Infrastructure Development

Corporation Limited (NHIDCL). It also deals with

matters relating to road transport such as

implementation of central legislation including the

Motor Vehicles Act, 1988.

This note looks at the proposed expenditure of the

Ministry for the year 2021-22, its finances over the

last few years, and issues with the same.

Allocations in Union Budget 2021-22

Fund allocation1

The total expenditure on the Ministry of Road Transport and Highways for 2021-22 is estimated at

Rs 1,18,101 crore. This is an annual increase of

23% over the actual expenditure for 2019-20.

In 2021-22, capital expenditure is estimated at Rs

1,08,230 crore while revenue expenditure is

estimated at Rs 9,871 crore. Note that in 2014-15,

the ratio between revenue and capital expenditure

was 50:50. In 2015-16, this ratio changed, with the

Ministry spending more funds on capital

expenditureIn 2021-22, 90% of the Ministry’s

spending is estimated to be on capital expenditure.

Table 1: Budget allocations for the Ministry of

Road Transport and Highways (in Rs crore)

2019-20 Actual

2020-21 RE

2021-22 BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Revenue 9,875 9,770 9,871 0%

Capital 68,374 92,053 1,08,230 26%

Total 78,249 1,01,823 1,18,101 23%

Note: BE – Budget Estimate; RE – Revised Estimate. Sources: Demands for Grants 2021-22, Ministry of Road

Transport and Highways; PRS.


Utilisation of funds

In the past few years, the expenditure of the

Ministry has seen a significant increase, with the

maximum year-on-year increase at 42% seen in

2015-16.

Policy announcements in the Budget Speech2

In her budget speech, the Finance Minister made the following announcements regarding the roads sector:

▪ A National Monetisation Pipeline of potential brownfield infrastructure assets will be launched. An Asset Monetisation dashboard will also be created for tracking the progress and to provide visibility to investors.

▪ National Highways Authority of India has sponsored one InvIT that will attract international and domestic institutional investors. Five operational roads with an estimated enterprise value of Rs 5,000 crore are being transferred to the NHAI InvIT. Core infrastructure assets that will be rolled out under the Asset Monetisation Programme will include NHAI Operational Toll Roads.

▪ By March 2022, another 8,500 km of highways will be awarded and an additional 11,000 km of national highway corridors will be completed.

▪ New economic corridors to augment road infrastructure are being planned in Assam, Kerala, Tamil Nadu, and West Bengal.

Figure 1: Actual expenditure by the Ministry (in Rs crore)

Note: Figures for 2020-21 are revised estimates. Sources: Ministry of Road Transport and Highways budget

documents 2009-21; PRS.

However, typically the actual expenditure by the

Ministry has been lower than the budget estimates

(see Figure 2). As per the revised estimates of

2020-21, the Ministry is expected to exceed its

budgeted expenditure by 11%. Before this, the

Ministry had exceeded its budgeted expenditure by

9% in 2018-19. This was largely due to additional

expenditure incurred on capital outlay towards roads

and bridges.

-20%

-10%

0%

10%

20%

30%

40%

50%

0

20,000

40,000

60,000

80,000

1,00,000

1,20,000

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Demand for Grants 2021-22 Analysis: Road Transport and Highways PRS Legislative Research

- 77 -

Figure 2: Difference between Actual and

Budgeted expenditure (in %)

Note: The number for 2020-21 compares the budget estimates

with the revised estimates.

Sources: Ministry of Road Transport and Highways budget


Expenditure of the central government

In 2021-22, of the total expenditure, the highest

allocation is towards roads and bridges at Rs 60,261

crore (51%).1 This is followed by allocation

towards NHAI at Rs 57,350 crore (48.6%).1

Table 2: Expenditure heads for the Ministry of

Road Transport and Highways (in Rs crore)

Major head

2019-20 Actual

2020-21 RE

2021-22 BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22) Roads and bridges

46,305 52,376 60,261 14%

NHAI 31,691 49,050 57,350 35%

Road transport and safety

148 231 336 51%

Others 138 167 154 6%

Total 78,249 1,01,823 1,18,101 23%

Note: BE – Budget Estimate; RE – Revised Estimate.

Total for 2019-20 includes actual recoveries of Rs 33 crore.

Sources: Demands for Grants 2021-22, Ministry of Road


Roads and bridges: Expenditure under roads and

bridges includes development of NHs, projects

related to expressways, increasing the number of

lanes under various projects, and development of

road connectivity in left-wing extremism affected

areas. In 2021-22, the allocation towards roads and

bridges is Rs 60,261 crore. This is an annual


Note that in 2017 and 2018, the actual allocation

towards roads and bridges was lower than the

budget estimate for that year by 9% and 8%

respectively. However, as per the revised estimates

of 2020-21, the allocation towards roads and bridges

is estimated to exceed the budget estimate by 7%.

Figure 3: Budget vs actual allocation towards

roads and bridges (in Rs crore)

Note: Actual figures for 2020-21 are revised estimates. Sources: Ministry of Road Transport and Highways budget


NHAI: The central government develops and

maintains NHs through the NHAI. In 2021-22,

NHAI has been allocated Rs 57,350 crore, which is

an annual increase of 35% over 2019-20. Of the

budgeted amount, 61% (Rs 34,700 crore) will be

provided from the Central Road and Infrastructure

Fund, 22% (Rs 12,650 crore) will be provided from

the Permanent Bridge Fees Fund, and the remaining

17% (Rs 10,000 crore) will come from the

monetisation of the National Highways.1

Note that the allocation towards NHAI has almost

doubled from 2017-18 to 2020-21 (revised

estimates). While the actual allocation in 2019-20

fell short of the budgeted estimate by 14%, the

revised estimates for 2020-21 expect a 15% increase

in the allocation from the budgeted stage.

Figure 4: Budget vs actual allocation towards NHAI (in Rs crore)

Note: Actual figures for 2020-21 are revised estimates. Sources: Ministry of Road Transport and Highways budget


Expenditure on the NHAI includes funding towards

the umbrella highway scheme, Bharatmala

Pariyojana. This scheme seeks to optimise the

efficiency of freight and passenger movement by

bridging critical infrastructure gaps. It also aims to increase the number of districts with NH linkages

from 300 to 550.3 Under Phase I of Bharatmala

Pariyojana, 34,800 km of roads will be developed

over a period of five years. Phase I will also

subsume 10,000 km of balance roadworks under the

National Highway Development Programme. The

-30%

-20%

-10%

0%

10%

20%20

09-1

0

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

-

20,000

40,000

60,000

80,000

2017-18 2018-19 2019-20 2020-21 2021-22

Budget Actual

-

20,000

40,000

60,000

80,000

2017-18 2018-19 2019-20 2020-21 2021-22


- 78 -

estimated cost of Phase I is Rs 5,35,000 crore,

spread over five years.

Till January 2021, road projects with an aggregate

length of about 13,521 km, and costing Rs 3.45 lakh

crore have been approved under Bharatmala

Pariyojana Phase-I.4 Of this, road length of 3,758

km has already been completed.5

As announced in the Budget Speech 2021-22, by

March 2022, another 8,500 km of NH projects will

be awarded and an additional 11,000 km of national

highway corridors will be constructed.2

Funds managed by the Ministry

The Ministry manages its expenditure through

various funds. Their details are provided below.

Central Road and Infrastructure Fund (CRIF):

A majority of the Ministry’s expenditure is managed

through transfers from the CRIF. A portion of the

cess collected on motor spirit and high-speed diesel

is earmarked for the development of NHs and SHs,

and the amount is transferred to the non-lapsable

CRIF. This amount is eventually released to the

NHAI, and to the state/UT governments for the

development of road infrastructure (and other

infrastructure projects such as railways) in the

country.1

For 2021-22, the transfer from CRIF towards the

Ministry is estimated at Rs 79,147 crore.1 This is a

20% annual increase from the actual transfer in

2019-20 (Rs 54,539 crore).

Permanent Bridge Fees Fund (PBFF): Funds

transferred to the PBFF relate to the revenue

collected by the government through: (i) fees levied

for the use of certain permanent bridges on NHs by

motor vehicles, (ii) toll on NHs, and (iii) revenue

share received on some PPP projects. These funds

are then released to the NHAI for the development

of NHs entrusted to it.1

For 2021-22, the transfer to PBFF is estimated at Rs

12,670 crore. This is a 9% annual increase from the

actual transfer in 2019-20 (Rs 10,610 crore).

National Investment Fund (NIF): The NIF was

created in 2005, and is credited with proceeds from disinvestments of public sector enterprises. The

Ministry finances the Special Accelerated Road

Development Programme in North East (SARDP-

NE) with funds from the NIF.

For 2021-22, the transfer to NIF is estimated at Rs

7,500 crore. This is an 11% annual increase from

the actual transfer in 2019-20 (Rs 6,070 crore).

National Highways Fund: In August 2016, the

Union Cabinet had authorised NHAI to monetise

certain public funded NH projects.6 Such

monetisation includes transferring operations and

maintenance of stretches of NHs to private

contractors on a long-term basis. In 2021-22, Rs

10,000 crore is estimated to be generated through

such monetisation. This is a 41% annual increase

from the actual monetisation amount in 2019-20 (Rs

5,000 crore).

Table 3: Summary of transfers from funds (in Rs

crore)

Funds 2019-20 Actual

2020-21 RE

2021-22 BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

CRIF 54,539 69,622 79,147 20%

PBFF 10,610 11,518 12,670 9%

National Highways Fund

5,000 10,250 10,000 41%

National Investment Fund

6,070 3,000 7,500 11%

Note: BE – Budget Estimate; RE – Revised Estimate.

Sources: Demands for Grants 2021-22, Ministry of Road


Issues to consider

India has about 64 lakh km of road length, second

only to the United States which has about 66 lakh

km of road length.7 This road length includes

National Highways (NHs), Expressways, State

Highways (SHs), district roads, PWD roads, and

project roads. In India, road infrastructure is used to

transport over 60% of total goods and 85% of total

passenger traffic.8 NHs comprise about 2% of the

road network but carry about 40% of the total road

traffic.9 The Economic Survey (2020) also noted

that road transport is the dominant mode of

transportation in the country.7 The entire transport

sector contributed to about 4.6% of the GVA in

2018-19, of which road transport contributed about

67%.7

The table below shows the details on road

construction in India. As per the Economic Survey

2020-21, the decline in the construction of road per

day in 2020-21 is mostly due to the shock of

COVID-19.

Table 4: Road construction in India

Year

Award of

NHs/ Road

projects

Construction

of NHs/ Road

projects

Road construction

per day

(in km)

2014–15 7,972 4,410 12

2015–16 10,098 6,061 17

2016–17 15,948 8,231 23

2017-18 17,054 9,829 27

2018-19 5,494 10,855 30

2019-20 8,900 10,200 28

2020-21 5,100 4,000 22

Note: Data for 2020-21 is as on September 30, 2020.

Sources: Economic Survey 2020-21; PRS.


- 79 -

However, the roads sector has been facing several

constraints such as: (i) lack of equity with

developers, (ii) higher cost of financing, (iii)

shortfall in funds for maintenance, (iv)

unavailability of land for the expansion of NHs, (v)

significant increase in land acquisition cost, and (vi)

bottlenecks and checkpoints on NHs which could

adversely impact benefits of GST.10 The Standing Committee on Transport (2020) had also highlighted

NHAI’s increasing debt which could lead to severe

financial issues in the future.11 We discuss some of

these issues below.

Issues with financing

The figure below highlights the total investment in the roads sector, as highlighted by the Economic

Survey 2020-21.7 The total investment in road

sector has grown at a CAGR of 27% from 2014-15

to 2019-20. The share of borrowings in this

investment has grown from 6% in 2014-15 to 43%

in 2019-20. During the same time period the share

of both budgetary support and private investment in

the total investment has decreased from 57% to 44%

and from 37% to 13% respectively.

Figure 5: Investment in road sector

Note: Figures for 2020-21 are up to September 30, 2020.

Sources: Economic Survey 2020-21; PRS.

Budgetary support from central government

The Standing Committee on Transport (2020) noted

that increasing the gross budgetary support to the

Ministry while the private sector investment is

declining may not be a sustainable growth plan.11

The Committee had made similar observations in

2016 and 2018 and had suggested that the

government should devise ways to mobilise funds

from other sources and establish appropriate

financial institutions and models to encourage the

return of private investment to the road sector.12,13

The Committee (2016) had also noted that while the

Ministry of Road Transport and Highways invests in

the construction of roads, it does not have its own

source of revenue other than budgetary support from

the central government. It recommended that the

RBI and Ministry of Finance may help the Ministry

of Road Transport to set up its own dedicated

financial institutions to generate funds for

development of the road sector. It also

recommended that the Ministry should monitor toll

collection and channel any surplus funds towards

stressed projects.

The Ministry expects to raise Rs 86,182 crore up to

2024-25 to fund projects under the National

Infrastructure Pipeline, by monetising its assets

under the Toll-Operate-Transfer (TOT) model.11

The Standing Committee (2020) had observed that

this might be a challenge for the Ministry since it

has planned to raise Rs 10,000 crore in 2019-20 by

monetising assets under various models including

TOT but could raise only Rs 5,000 crore.11 In 2021-

22, the Ministry plans to raise Rs 10,000 crore

through such monetisation.

In 2019-20, the actual capital outlay fell short of the

budget estimates by 4%. Most of this shortage was

due to shortage in budgetary support towards capital

outlay (14% shortage).

Borrowings

In 2021-22, NHAI estimates to borrow Rs 65,000

crore towards capital outlay. This amount is about

Rs 10,000 crore lower than the actual borrowings

for 2019-20 (reduction of 7% annualised over two

years). Note that this borrowing is in addition to the

Rs 57,350 crore of budgetary support.

The Standing Committee on Transport (2020) had

noted that NHAI’s debt has been increasing and as

of March 2020, the amount of debt NHAI had to

repay was more than twice the annual budgetary allocation of the Ministry for 2020-21.11 The debt

servicing cost of NHAI was estimated to rise to Rs

34,846 crore by 2021-22.11

In its Annual Report (2018), NHAI had noted that

with the debt obligations increasing due to

deferment of debt repayment, exposure of financial

institutions that lend to the roads sector has

increased significantly, reaching defined exposure

norms for the sector.9

The Comptroller and Auditor General of India

(2016) had also noted several procedural

inefficiencies with NHAI.14 For example, NHAI

could not realise toll on certain projects due to

delays in approvals, toll operations, and other

procedural lapses. NHAI did not adhere to the

Ministry’s guidelines on maintenance of project

wise balance sheet and cash flow.14 Inefficient

bidding processes for engaging toll collection

agencies also led to the loss of revenue.14

The Committee on Public Undertakings (2017) had

also noted several issues in the financial

performance of NHAI such as: (i) insufficiency of

funds, (ii) gap between the funds allocated to the

Ministry, and released to NHAI, and (iii) under-

utilisation of funds.15 For example, funds that are

0%

20%

40%

60%

80%

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Budgetary Support

Private Sector investment

Borrowings


- 80 -

left unspent at the end of a financial year is shown

as ‘opening balance’ at the beginning of the next

financial year. This opening balance was Rs 2,672

crore and Rs 6,740 crore for the years 2015-16 and

2016-17 respectively.15 This showed NHAI’s

inability to optimally utilise available funds.


recommended that the Ministry should constitute an

Advisory Committee to look into the increasing debt

of NHAI, and the efficacy of the measures

undertaken by the Ministry and NHAI to monetise

their assets.11 Further, the Ministry may increase

toll charges across the country and postpone certain

projects, as the present financial health of NHAI is

not sustainable in the long run and may create

bigger issues in the roads sector in the future.

Committees have also suggested more due diligence

on the part of NHAI. The Standing Committee on

Transport (2019) recommended that NHAI should

compare its project cost estimates with the actual

costs incurred on road projects.16 If there is a

substantial difference between the bid price offered

by the concessionaire and the project cost estimates

made by the government, NHAI should review its

cost estimation methodologies. The Committee

(2019) also suggested that the NHAI or central

government should appoint a credit rating agency to

assess the financial strength of private players and

their ability to meet debt repayment obligations.16

Private financing and contracts

In its Annual Report (2018), NHAI had noted that

the recent economic slowdown has led to lower

revenue realisation than expected. Several

developers had significantly leveraged their balance

sheets in anticipation of high revenue, and with

lower revenue realisation they face issues with debt

servicing.9 This also adds stress on the existing road

infrastructure loan portfolios of financial

institutions.

It has been noted that private financing for the roads

sector is a challenge.9,17 Several PPP road projects

have not been able to attract bids.17 The major

highway developers in the country are also facing

financial capacity constraints. Further, there is a

lack of debt products that are aligned with the

revenue stream profile of highway projects (long-

term projects where toll collection can begin only

after the entire project is completed). This makes

financing of such projects difficult, and has resulted

in some projects getting stalled at the construction

stage. This also discourages prospective bidders.17

The Committee on Revisiting & Revitalizing the

PPP model of Infrastructure Development (Chair:

Dr. Vijay Kelkar) had looked at issues with PPP

projects in India, in November 2015.18 It had

recommended setting up an independent regulator

for the roads sector to help bring in and regulate

private players in the sector. It had also noted that

service delivery (such as constructing roads) to

citizens is the government’s responsibility and

should not be evaded through PPPs.

NHAI has also noted that financing of large

infrastructure projects is based on revenue streams

spread over 20 to 30 years.9 If the debt for such

projects spans over 10 to 15 years, it leads to

sustainability issues and an asset liability mismatch.9

The Kelkar Committee (2015) had also observed

that since infrastructure projects span over 20-30

years, a private developer may lose bargaining

power because of abrupt changes in the economic or

policy environment. It recommended that the

private sector must be protected against such loss of

bargaining power. This could be ensured by

amending the terms of the concession agreement to

allow for renegotiations.

In order to resolve languishing projects the Ministry

has taken some steps which include: (i)

implementing an exit policy which allows private

developers to take out their entire equity and exit

operational Build-Operate-Transfer (BOT) projects

two years from the start of operations irrespective of

date of award; (ii) providing rationalised

compensation to concessionaires for languishing NH

projects in BOT mode for delays not attributable to

concessionaires; and (iii) a one-time fund infusion

by NHAI which enables revival and physical

completion of languishing BOT projects that have

achieved at least 50% physical progress, on a case to

case basis, among others.19

Non-performing assets: The Standing Committee

on Transport (2016) had observed that several long-

term loans disbursed for the road sector are turning

into non-performing assets (NPAs).12 Project bids

are often made without proper study, and projects

are awarded in a hurry. This results in stalling of

projects, and concessionaires leave mid-way.

Banks and other infrastructure lending institutions

have also been reluctant to finance the highways

sector.12 This has led to difficulties in debt

servicing, putting additional stress on the road

infrastructure portfolios. Besides increasing the cost

of the project, delays also make it difficult to obtain

additional debt.12

The Standing Committee on Transport (2016)

recommended that banks should take due diligence while disbursing loans to concessionaires. It also

suggested that the bank NPAs (related to the roads

sector) may be supported by government allocation.

Banks could be empowered to recover the bad debts.

Further, in light of huge NPAs lying with a single

bank, the Standing Committee (2019) recommended

that guidelines prescribing a limit up to which a

bank can lend to a single borrower be framed to

minimise the risk involved in lending.19


- 81 -

The Standing Committee on Transport (2019) also

suggested that NHAI should revisit the financial

requirements for bidders to ensure their eligibility

for the bidding process.19 While the onus of the

feasibility of the bids made by the concessionaire

lies mainly with the banks, NHAI should exercise

due diligence while awarding projects to

concessionaire with poor performance history.

Project delays and increase in project costs

The Committee on Public Undertakings (2017) had

noted that from 1995, till June 2016, out of the total

388 projects completed, only 55 projects were

completed on or before time.15 Delays in the

completion of the projects were mainly attributed to: (i) the long time taken in land acquisition, and

obtaining environment and forest clearances, (ii)

poor performance of concessionaires due to

economic slowdown, (iii) cash flow problems, and

(iv) law and order issues.15 The Ministry has also

noted that recently projects have also been halted

due to NCLT proceedings against the developer.20

Such delays increase project costs, eventually

making certain projects unviable. As of December

2019, 773 NH projects with a total length of 28,432

km and costing Rs 2.72 lakh crore were delayed.21


recommended that a coordination mechanism at the

central level with the Ministries of Finance,

Environment and Forest and Defence will help

speed up the process of clearances.17 The Standing

Committee (2016) had also suggested that the

Ministry of Road Transport and Highways should

obtain all these clearances before awarding the

projects to concessionaires.

Increase in land acquisition costs

From January 1, 2015, the compensation for land

acquired by NHAI is determined as per the Right to

Fair Compensation and Transparency in Land

Acquisition Rehabilitation and Resettlement Act,

2013. The Committee on Public Undertakings

(2017) had noted that due to higher compensation

under the 2013 Act, the expenditure by the Ministry of Road Transport on land acquisition increased

from Rs 9,097 crore in 2014-15 to Rs 21,933 crore

in 2015-16.15 In 2017-18, NHAI spent more funds

on land acquisition (41% of the expenses) as

compared to project expenditure (39%).9 The

Standing Committee on Transport (2020) noted that

the average rate of land acquisition has increased

significantly from about Rs 0.92 Crore/Ha in 2013-

14 to Rs 3.13 crore per Ha in 2019- 20 (an increase

of 240%).

The Committee on Public Undertakings (2017) also

observed that farmers who were entitled to lesser compensation under the older law, have been

approaching courts for increased compensation.15

This has further delayed the land acquisition process

and added to the cost of projects.

Investment in maintenance of roads

In 2021-22 the Ministry has allocated Rs 2,680 crore

towards the maintenance of roads and highways

(including toll bridges). This is an annual increase

of 26% over the actual expenditure on maintenance

in 2019-20. However, note that in 2019-20, the

actual expenditure on maintenance was 47% less

than the budget estimate.

The amount allocated towards maintenance, Rs

2,680 crore, is about 2% of the ministry’s budget.

This is for a total NH length of about 1.36 lakh km

(as of December 2020).22 In comparison, in 2020-

21 the US government seeks to allocate $23.74

billion (about Rs 1.7 lakh crore, which is 51% of its

total budget on highways) towards its National

Highway Performance Program, to improve the

condition and performance of their National

Highway System (roughly 3.5 lakh km of length).23

The National Transport Development Policy

Committee (2014) had noted that the amount spent

on maintenance of roads is low.24 This results in

roads with potholes, weak bridges, and poor

pavements, and has safety consequences. Further,

maintenance is carried out only when required, as

opposed to being a part of preventive measures.24

The Standing Committee on Transport (2018, 2020)

had also raised concerns that the entire amount

allocated towards maintenance does not get fully

utilised as well.11,13 Over the years, the Standing Committee has repeatedly noted that the entire

length of NHs in the country cannot be maintained

with this amount. NITI Aayog (2018) has noted that

the amount allocated for maintenance is about 40%

of the amount required.25

Maintenance of roads should be given top priority as

it increases the life span of roads. The Standing

Committee (2020) has recommended that the budget

for maintenance of NHs should be increased.11

NITI Aayog has suggested that 10% of the

Ministry’s annual budget should be earmarked for maintenance.25 The Standing Committee (2015) has

suggested that an effective monitoring mechanism

for repair and maintenance of roads should be put in

place.17 Further, there should be penalties for

contractors and engineers in case of poor quality

repair, maintenance, and construction.

Investment in road safety

In 2021-22, the Ministry has allocated Rs 336 crore

towards road transport and safety. This is an annual

increase of 51% over the actual expenditure on

maintenance in 2019-20. However, note that in

2019-20, the actual expenditure on maintenance was

47% less than the budget estimate.


- 82 -

The allocation towards safety provides for various

things such as road safety programmes, setting up of

facilities on NHs, for extending relief to accident

victims, strengthening of public transport, research

and development, and training.

The amount allocated towards road safety in 2021-

22 is about 0.3% of the Ministry’s total budget. In

comparison, in 2019 the US federal government

spent about $2.7 billion on its Highway Safety

Improvement Programme (6% of its total

expenditure on highways).25 The Standing

Committee on Transport (2020) suggested that the

Ministry may seek higher fund allocation towards

road safety, and driver training programmes.

In 2019, there were 4,49,002 road accidents in India,

which killed about 1.5 lakh people and injured about

4.5 lakh people.26 As per the World Road Statistics,

2018, India ranks first in the number of road

accident deaths (among 199 countries reported),

followed by China and the US. As per the WHO

Global Report on Road Safety 2018, about 11% of

the accident-related deaths in the world occur in

India.25

In 2019, Parliament passed the Motor Vehicles

(Amendment) Bill, 2019 which seeks to address various issues around road safety. It increases the

penalties for various offences under the Act, and

provides for a Motor Vehicle Accident Fund which

would be used for the treatment of persons injured

in road accidents. It also provides for a National

Road Safety Board, which would advise the central

1 Notes on Demands for Grants 2021-22 Demand no 85, Ministry

of Road Transport and Highways,

https://www.indiabudget.gov.in/doc/eb/sbe85.pdf. 2 Budget Speech 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. . 3 Lok Sabha Unstarred question no. 1129, Ministry of Road

Transport and Highways, December 21, 2017. 4 Lok Sabha Starred Question No. 42, Ministry of Road Transport

and Highways, February 4, 2021. 5 Rajya Sabha Unstarred Question No. 1563, Ministry of Road

Transport and Highways, December 2, 2019. 6 “Cabinet authorized National Highways Authority of India to

monetize public funded national highway projects”, Press

Information Bureau , Cabinet Committee on Economic Affairs

(CCEA), August 3, 2016,

http://pib.nic.in/newsite/PrintRelease.aspx?relid=148306. 7 Volume 2, Economic Survey 2020-21, January 29, 2021,

https://www.indiabudget.gov.in/economicsurvey/. 8 Basic Road Statistics of India 2016-17, Ministry of Road

Transport and Highways,

http://morth.nic.in/showfile.asp?lid=4585. 9 Annual Report 2017-18, National Highways Authority of India,

Ministry of Road Transport and Highways,

https://nhai.gov.in/writereaddata/Portal/Images/pdf/CompressedN

HAIAnnualReportEnglishcorrected.pdf. 10 Chapter 8: Industry and Infrastructure, Economic Survey 2016-

17, Volume 2, August 2017,

http://www.indiabudget.gov.in/es2016-17/echapter_vol2.pdf. 11 “278th Report: Demands for Grants (2020-21) of Ministry of

Road Transport and Highways”, Standing Committee on

Transport, Tourism and Culture, March 12, 2020,

and state governments on all aspects of road safety

and traffic management. The Ministry has notified

several Rules to implement provisions of the Act,

such as: (i) protection of Good Samaritans, (ii)

conditions for states to levy higher penalties than

those in the Act, and (iii) amendments to obtaining

driving licenses, among others.22

Connectivity in remote areas

The Ministry also allocates funds towards the

development of highways in areas with poor

connectivity. Some of these projects include the

Special Accelerated Road Development Programme

in North East (SARDP-NE), Externally Aided

Projects and Roads Projects in Left-Wing

Extremism Affected Areas.

In 2021-22, Rs 9,590 crore has been allocated

towards the SARDP-NE project, which includes Rs

2,090 from gross budgetary support. This is a 27%

annual increase from the actual expenditure in 2019-

20. The Standing Committee on Transport has

repeatedly (2018, 2020) noted underutilisation of

funds and under-achievement of targets in SARDP-

NE.11,13 The Standing Committee (2020) noted that

projects in the north eastern region face a significant

delay of almost a decade in completion. This causes inconvenience to the commuters, and also adds to

the project cost.11 The Committee noted that the

issues causing such delays are specific to the region

and suggested that the Ministry consider these when

projecting timelines and expenditure for projects in

this region.


ReportFile/20/127/278_2020_9_15.pdf. 12 “236th Report: Infrastructure Lending in Road Sector”,

Standing Committee on Transport, Tourism and Culture, August

10, 2016,

http://164.100.47.5/newcommittee/reports/EnglishCommittees/C

ommittee%20on%20Transport,%20Tourism%20and%20Culture/

236.pdf. 13 “259th Report: Demands for Grants (2018-19) of the Ministry

of Road Transport and Highways”, Standing Committee on

Transport, Tourism and Culture, March 6, 2018,


ReportFile/20/102/259_2018_6_17.pdf. 14 Chapter 12: Ministry of Road Transport and Highways, Report

No. 9 of 2017, 2016, Compliance Audit Union Government

Commercial, Comptroller and Auditor General of India, April 5,

2017,

http://www.cag.gov.in/sites/default/files/audit_report_files/Execu

tive_Summary_report_No_9_%20of_2017_on_compliance_audit

_observations_union_government.pdf. 15 “19th Report, Committee on Public Undertaking: ‘National

Highways Authority of India’”, Lok Sabha, August 2, 2017,

http://164.100.47.193/lsscommittee/Public%20Undertakings/16_

Public_Undertakings_19.pdf. 16 “272nd Report: Action Taken by the Government on the

Recommendations/Observations of the Committee contained in

its Two Hundred and Thirty Sixth Report on ‘Infrastructure

Lending in Road Sector’”, Standing Committee on Transport,

Tourism and Culture, December 9, 2019,


ReportFile/20/127/272_2020_9_12.pdf.



http://pib.nic.in/newsite/PrintRelease.aspx?relid=148306

https://www.indiabudget.gov.in/economicsurvey/

http://morth.nic.in/showfile.asp?lid=4585

https://nhai.gov.in/writereaddata/Portal/Images/pdf/CompressedNHAIAnnualReportEnglishcorrected.pdf

https://nhai.gov.in/writereaddata/Portal/Images/pdf/CompressedNHAIAnnualReportEnglishcorrected.pdf

http://www.indiabudget.gov.in/es2016-17/echapter_vol2.pdf



http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Transport,%20Tourism%20and%20Culture/236.pdf





http://www.cag.gov.in/sites/default/files/audit_report_files/Executive_Summary_report_No_9_%20of_2017_on_compliance_audit_observations_union_government.pdf



http://164.100.47.193/lsscommittee/Public%20Undertakings/16_Public_Undertakings_19.pdf

http://164.100.47.193/lsscommittee/Public%20Undertakings/16_Public_Undertakings_19.pdf




- 83 -

17 “220th Report: Demands for Grants (2015-16) of Ministry of

Road Transport and Highways”, Standing Committee on

Transport, Tourism and Culture, April 28, 2015,


ReportFile/20/31/220_2016_7_17.pdf. 18 “Report of the Committee on Revisiting and Revitalising

Public Private Partnership Model of Infrastructure”, Department

of Economic Affairs, Ministry of Finance, November 2015,

https://www.pppinindia.gov.in/infrastructureindia/documents/101

84/0/kelkar+Pdf/0d6ffb64-4501-42ba-a083-ca3ce99cf999. 19 “272nd Report: Action Taken by the Government on the

Recommendations/Observations of the Committee contained in

its Two Hundred and Thirty Sixth Report on 'Infrastructure

Lending in Road Sector”, Standing Committee on Transport,

Tourism and Culture, December 9, 2019,


ReportFile/20/127/272_2019_12_15.pdf. 20 Lok Sabha Starred Question No. 249, Answered on 5th

December, 2019, Ministry of Road Transport and Highways.

21 Lok Sabha Unstarred Question No.2470, Answered on 5th

March, 2020, Ministry of Road Transport and Highways. 22 “Year-end Review”, Press Information Bureau, Ministry of

Road Transport and Highways, December 30, 2020,

https://pib.gov.in/PressReleasePage.aspx?PRID=1684574. 23 FHWA FY 2019 Budget, Federal Highway Administration,

https://www.fhwa.dot.gov/cfo/fhwa-fy-2019-cj-final.pdf. 24 “Volume 3, Chapter 2, Roads and Road Transport”, India

Transport Report: Moving India to 2032, National Transport

Development Policy Committee, June 17, 2014,

http://planningcommission.nic.in/sectors/NTDPC/volume3_p1/ro

ads_v3_p1.pdf. 25 Strategy for New India @ 75, NITI Aayog, November 2018,

https://niti.gov.in/sites/default/files/2019-

01/Strategy_for_New_India_0.pdf. 26 Road Accidents in India 2019, Transport Research Wing,

Ministry of Road Transport and Highways,

.



https://www.pppinindia.gov.in/infrastructureindia/documents/10184/0/kelkar+Pdf/0d6ffb64-4501-42ba-a083-ca3ce99cf999

https://www.pppinindia.gov.in/infrastructureindia/documents/10184/0/kelkar+Pdf/0d6ffb64-4501-42ba-a083-ca3ce99cf999



https://pib.gov.in/PressReleasePage.aspx?PRID=1684574

https://www.fhwa.dot.gov/cfo/fhwa-fy-2019-cj-final.pdf

http://planningcommission.nic.in/sectors/NTDPC/volume3_p1/roads_v3_p1.pdf

http://planningcommission.nic.in/sectors/NTDPC/volume3_p1/roads_v3_p1.pdf

https://niti.gov.in/sites/default/files/2019-01/Strategy_for_New_India_0.pdf


- 84 -

Demand for Grants: Education

The Ministry of Education consists of two

departments: (i) school education and literacy, and

(ii) higher education. The Department of School

Education and Literacy is broadly responsible

for education imparted between the ages of six to

18 years, i.e., school education. Under the Right

to Education (RTE) Act, 2009 the government is

mandated to provide elementary education to all

children between 6-14 years of age. Secondary

education is imparted between Class 9-12 for

children between 14-18 years of age.

The Department of Higher Education is

responsible for higher education, and training for

students above 18 years of age. Higher education

includes undergraduate and postgraduate courses,

doctoral degrees, and certificates following the

completion of 12 years of schooling or equivalent.

This note looks at the proposed expenditure of the Ministry for 2021-22, trends in this expenditure

and discusses some of the issues related to the

education sector.


In 2021-22, the Ministry has been allocated Rs

93,224 crore, the 8th highest allocation among all Ministries. The allocation constitutes 2.67% of

the central government’s estimated expenditure

for 2021-22.

The Economic Survey 2019-20 noted that the

expenditure on education by the centre and the

states as a proportion of the Gross Domestic

Product (GDP) has been around 3% between

2014-15 to 2018-19.1 The National Policy on

Education 1968 recommended the spending on

Education to be 6% of GDP. National Education

Policy, 2020 (NEP) reaffirms the recommendation of increasing public investment on education to

6% of GDP.

In 2021-22, the Department of School

Education and Literacy has been allocated Rs

54,874 crore, accounting for 59% of the

Ministry’s total allocation. The Department of

Higher Education has been allocated Rs 38,351

crore, accounting for 41% of the Ministry’s total

allocation.


Budget Estimates 2021-22

The Ministry has been allocated Rs 93,224 crore

in 2021-22, which is an annual increase of 2.1%

over the actual expenditure in 2019-20.2

Table 1: Budget allocations for the Education

(2021-22) (in Rs crore)


2020-21 RE

2021-22 BE

Annualised change (Actuals

2019-20 to BE 2021-22)

School Education & Literacy

52,520 52,189 54,874 2.2%

Higher Education

36,916 32,900 38,351 1.9%

Total 89,437 85,089 93,224 2.1% Note: BE – Budget Estimate; RE – Revised Estimates;

Annualised change is from 2019-20 Actuals to 2021-22 BE.

Sources: Expenditure Budget - Ministry of Education, 2021-

22; PRS.

In 2021-22, the highest expenditure (33%) is

allocated towards Samagra Shiksha (Rs 31,050

crore), followed by: (i) autonomous bodies (12%) such as Kendriya Vidyalaya Sangathan (KVS), (ii)

Mid-Day Meal Programme (12%), (iii) grants to

central universities (8%), (iv) Indian Institutes of

Technology (8%), and (v) statutory and regulatory

bodies (University Grants Commission (UGC)

and All India Council for Technical Education

(AICTE)) (5%), among others.

Table 1 shows the key heads under which the

Ministry spends its funds (as a percentage of its

total expenditure).

Budget speech highlights 2021-223

▪ The Higher Education Commission of India will be constituted as an umbrella body with four separate bodies for standard setting, accreditation, regulation, and funding.

▪ Over 15,000 schools will be qualitatively strengthened to implement National Education Policy.

▪ An umbrella structure will be created in nine cities each to facilitated better cooperation between various research institutes, universities, and colleges under the central government.

▪ 100 new Sainik Schools will be set up in partnership with non-government organisations, private schools, and states.

▪ A central university will be set up in Leh for better accessibility to higher education in the region.

Demand for Grants 2021-22 Analysis: Education PRS Legislative Research

- 85 -

Table 2: Major heads of expenditure under the

Ministry of Education (2021-22) (in %)

Expenditure head

Allocation (as % of

total expenditure)

Samagra Shiksha 33%

Autonomous Bodies 12%

Mid-Day Meal Programme 12%

Grants to Central Universities 8%

Indian Institutes of Technology 8%

UGC and AICTE 5%

National Institutes of Technology and IIEST

4%

Rashtriya Uchhatar Shiksha Abhiyan (RUSA)

3%

Student Financial Aid 3%

Others 10%

Total 100%

Note: Autonomous Bodies include Kendriya Vidyalaya

Sangathan (KVS) and Navodaya Vidyalaya Samiti (NVS);

‘Others’ include schemes and programmes under the Ministry

each with an allocation of less than 3% of the total

expenditure.

Sources: Expenditure Budget - Ministry of Education, 2021-

22; PRS.

Key highlights related to allocations in 2020-21

In 2020-21, the allocation for the Ministry of

Education has reduced from Rs 99,312 crore at the

budget stage to Rs 85,089 crore at the revised

stage (a decrease of 14%).

The schemes with a significant reduction in

allocation at the revised stage include: (i) Higher

Education Financing Agency (91% reduction), (ii)

student financial aid (48% reduction), and (iii)

Samagra Shiksha (48% reduction).

Some of the heads which observed an increase in

their allocation at the revised stage are: (i) world

class institutions (increased by 120%), (ii) Mid-

Day Meal programme (increased by 17%), (iii)

autonomous bodies such as Kendriya Vidyalaya Sangathan (KVS) (increased by 13%), and (iv)

grants to Central Universities (increased by 13%).

Refer Table 10 in the Annexure for a detailed

breakup of the expenditures under the Ministry.

Financing education

The Standing Committee on Human Resource

Development (2020) noted that the Department of

School Education and Literacy had been allocated

28% less than what the Ministry had proposed in

2020-21 (allocated Rs 59,845 crore against the

proposed amount of Rs 82,570 crore).4 The

Committee recommended additional funds for

centrally sponsored schemes and central sector

schemes under the department at the revised

estimates stage. However, at the revised stage, the

budget for centrally sponsored schemes was

reduced from Rs 50,081 crore to Rs 41,400 crore

and for the central sector schemes, the allocation

was reduced from Rs 520 crore to Rs 354 crore.4

In 2020-21, the highest reduction in allocation at

the revised stage among centrally sponsored

schemes was for Samagra Shiksha (reduction of

Rs 10,794 crore from the budget stage). Among

central sector schemes, the highest reduction was

for the National Scheme for Incentive to Girl

Child for Secondary Education (reduced from Rs

110 crore at the budget stage to Rs One crore at

the revised stage).

Another Standing Committee on Human Resource

Development (2020) noted that the allocation for Central Universities is inadequate as compared to

their infrastructure, faculty and number of

students enrolled.26 This affects the

implementation of schemes. Thus, the Committee

recommends increasing the budgetary allocations

of the department of higher education.

The NEP 2020 states that to achieve the target of

public spending of 6% of GDP on education at the

earliest, financial support will be provided to

critical components of education. These

components include: (i) adequate number of teachers and staff, (ii) teacher development, and

(iii) development of learning resources. In the

long-term, the policy recommends investments in

key thrust areas of education such as: (i) teacher

education and development, (ii) revamping

colleges and universities, (iii) promotion of

research, (iv) foundational literacy, and (v) quality

early childhood care education. Further, the

Policy recommends the efficient use of funds to

avoid underutilisation of allocations. This will

help in the timely achievements of targets under

various schemes for education.

Department of School Education and Literacy

Allocation to the department has seen an annual

growth of 7% between 2010-11 and 2021-22.

Figure 1: Expenditure by Department of School

Education and Literacy (2010-22) (Rs crore)

Note: Revised estimates have been used for 2020-21 and

Budget estimates for 2021-22.

Sources: Expenditure Budget, 2010-22; PRS.

-20%

0%

20%

40%

60%

-20,000

-

20,000

40,000

60,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Department of school education and literacy % change


- 86 -


Department of School Education and Literacy

in 2021-22 (in Rs crore)

Major Head 19-20

Actuals 20-21

RE 21-22

BE

Annualised Change

(Actuals 19-20 to BE 21-

22)

National Education Mission

32,377 28,078 31,300 -2%

-Samagra Shiksha

32,377 27,957 31,050 -2%

-Teachers

Training and Adult Education

- 120 250 -

Mid-Day Meal Programme#

9,699 12,900 11,500 9%

Autonomous bodies

10,077 10,395 11,192 5%

Scholarship Scheme*

331 350 350 3%

Others 36 467 532 91.3%

Total 52,520 52,189 54,874 5.9%

Note: Annualised Change is from 2019-20 Actuals to 2021-22

Budget Estimate; # Refers to National Programme of Mid-Day

Meal in Schools; * Refers to National Means-cum-Merit

Scholarship Scheme.

Sources: Expenditure Budget, 2021-22; PRS.

Table 4 shows a trend of utilisation of funds

allocated to the department between 2010-11 and

2020-21.

Table 4: Comparison of budget estimates and

the actual expenditure (2010-21) (in Rs crore)

Year Budget

Estimate Actuals

Utilisation % (Actuals/BE)

2010-11 33,214 36,433 110%

2011-12 41,451 40,641 98%

2012-13 48,781 45,631 94%

2013-14 52,701 46,856 89%

2014-15 55,115 45,722 83%

2015-16 42,220 41,800 99%

2016-17 43,554 42,989 99%

2017-18 46,356 46,600 101%

2018-19 50,000 48,441 97%

2019-20 56,537 52,520 93%

2020-21 59,845 52,189* 87% Note: BE – Budget Estimate. *Revised Estimate

Sources: Union Budgets, 2012-22; PRS.

National Education Mission: The NEM consists

of two expenditure heads: (i) Samagra Shiksha,

and (ii) Teachers Training and Adult Education.

Allocation to the NEM accounts for 34% of the

total budget of the Ministry of Education. In 2021-22, the NEM has been allocated Rs 31,300

crore, which is a 2% annual decrease as compared

to 2019-20.

Samagra Shiksha was launched in July 2018. It

aims to ensure inclusive and equitable quality

education at all levels of school education. It

subsumed three erstwhile centrally sponsored

schemes: (i) Sarva Shiksha Abhiyan (SSA), (ii)

Rashtriya Madhyamik Shiksha Abhiyan (RMSA),

and (iii) Teacher Education (TE).

In 2021-22, Samagra Shiksha has been allocated

Rs 31,050 crore (6.8% annual increase over 2019-

20). The allocation for Samagra Shiksha accounts

for 57% of the total departmental allocation and

99% of the allocation for the National Education

Mission. In 2020-21, Samagra Shiksha was

allocated Rs 38,751 crore which was reduced to

Rs 27,957 crore at the revised stage (a decline of

28%).

Teacher Training and Adult Education has been allocated Rs 250 crore in 2021-22, which is 0.5%

of the total departmental allocation. In 2020-21,

teacher training and adult education had an

allocation of Rs 110 crore at the budget stage,

which was increased to Rs 120 crore at the revised

stage (an increase of 9%).

National Programme of Mid-Day Meal in

Schools: In 2021-22, the mid-day meal

programme has been allocated Rs 11,500 crore

(9% annual increase over 2019-20). In 2020-21,

the programme was allocated Rs 11,000 crore at the budget stage which was increased by 17% to

Rs 12,900 crore at the revised stage. The

programme targets enhancement of enrolment,

retention, attendance, and nutritional levels

among children studying in Class 1 to 8 across

India.

Autonomous bodies: These include: (i) Kendriya

Vidyalaya Sangathan (KVS), (ii) Navodaya

Vidyalaya Samiti (NVS), (iii) National Council of

Educational Research and Training (NCERT), (iv)

Central Tibetan School Administration (CTSA),

and (v) National Bal Bhawan. In 2021-22, the allocation for autonomous bodies is Rs 11,192

crore (5% annual increase from 2019-20).

National Means-cum-Merit Scholarship

Scheme: The scheme provides one lakh

scholarships of Rs 6,000 per annum each to

eligible meritorious students in Class 9. The

scholarship is provided up to Class 12 to prevent

students from dropping out due to financial

constraints.

In 2021-22, Rs 350 crore has been allocated for

the scheme (3% annual increase over 2019-20).

In 2020-21, the scheme was allocated Rs 372

crore at the budget stage, which was reduced to Rs

350 crore at the revised stage (6% decrease).


- 87 -

Key issues in school education

Enrolment, transition, and dropout rates

Enrolment: Gross Enrolment Ratio (GER) is the

student enrolment as a proportion of the

corresponding eligible age group in a given year.

In 2018-19, the GER in primary education was

close to 100%.5 However, the GER reduces to

77% at the

secondary level, and to 50% at the senior

secondary level. This implies that curtailing

dropouts in the education system remains a

challenge. The GER for upper primary,

secondary, and senior secondary level of

education between 2010-11 and 2018-19 annually

increased 1%, 2%, and 4% respectively. The

GER for the primary level of education had an

annual decline of 1% between this period. Figure

2, compares GER in India with other countries as

in 2015-16.

Figure 2: International comparison of GER

(2015-16)

Sources: Educational statistics at a Glance 2018; PRS.

India’s enrolment rate in Class 1-5 and Class 6-8

is comparable to that of developed countries.

However, it is significantly less (68%) than these

countries for Class 9-12 (see Figure 3).

The NEP 2020 notes that the decline in GER is

higher for certain socio-economically

disadvantaged groups, based on: (i) gender

identities (female, transgender persons), (ii)

socio-cultural identities (scheduled castes,

scheduled tribes), (iii) geographical identities

(students from small villages and small towns),

(iv) socio-economic identities (migrant

communities and low-income households), and

(v) disabilities.6

Transition and dropouts: Transition rates reflect

the dropout levels in the school education system.

It is the percentage of pupils enrolled in the final

grade of the current stage who proceed to the first

grade of the next stage. Higher the transition rate,

lower the dropout level. As of September 2016,

the transition rate from primary to upper primary

and from elementary to secondary was close to

90%, however, the transition rate from secondary

to senior secondary was only 66% (Figure 3).7

Note that there is a difference in transition rate

from elementary to secondary education (Class 8

to Class 9) between boys and girls. The transition

rate for both genders is low for the transition from

secondary to senior secondary (Class 10 to 11).

Figure 3: Transition rate across different levels

of education (as of September 2016)

Sources: UDISE Flash Statistics 2016-17, MHRD; PRS.

According to the Ministry, the most prominent

reason for dropping out in 2015-16 was the

engagement in domestic activities (for girls)

and engagement in economic activities (boys)

(Table 5).8

To improve the retention of children in

schools, the NEP 2020 recommends

strengthening existing schemes and policies

which are targeted at socio-economically

disadvantaged groups. For instance, schemes

for free bicycles for girls from socio-economically disadvantaged groups or

scholarships to tackle dropouts. Further, it

recommends setting up special education

zones in areas with a significant proportion of

such disadvantaged groups. A gender

inclusion fund should also be set up to assist

female and transgender students in getting

access to education.


Development (2020) suggested that vocational

training be provided to students dropping out at the secondary level. This will help them get

job opportunities at the earliest and continue

their studies.4

99%

104%

101% 10

9%

100%

93% 99

%

101% 11

3%

102%

68%

90% 10

5%

138%

93%

0%

25%

50%

75%

100%

125%

150%

India China Russia UK USA

Class 1-5 Class 6-8 Class 9-12

88%

93%

66%

89%

88%

66%

89%

90%

66%

0%

20%

40%

60%

80%

100%

Primary to UpperPrimary Stage

Elementary toSecondary Stage

Secondary toHigher Secondary

Stage

Boys Girls Total


- 88 -

Table 5: Major reasons for dropping out (Class

1-12) for 2015-16

Reason for dropping out Male Female

Child not interested in studies

23.8% 15.6%

Financial Constraints 23.7% 15.2%

Engage in Domestic Activities

4.8% 29.7%

Engage in Economic Activities

31.0% 4.9%

School is far off 0.5% 3.4%

Unable to cope up with studies

5.4% 4.6%

Completed desired level/ Grade

5.7% 6.5%

Marriage 13.9%

Other reasons 5.1% 6.2%

Note: Other reasons include: (i) timings of educational Institution

not suitable, (ii) language/medium of Instruction used unfamiliar,

(iii) inadequate number of teachers, (iv) quality of teachers not

satisfactory, (v) unfriendly atmosphere at school. For girl

students, other reasons also include: (i) non-availability of female

teachers, (ii) non-availability of girl’s toilet.

Sources: Educational Statistics at Glance 2018, MHRD; PRS.

The Committee stated that Samagra Shiksha has

the potential to revamp school education. Note

that the utilisation of funds under Samagra

Shiksha in 2019-20 was 89%. The Committee

specified that such underutilisation and any reduction in funds may lead to an adverse impact

on project implementation at the ground level.4

Further, the Committee noted that the

development of infrastructure has been slow in

elementary and secondary schools. This

includes: (i) toilets for children with special

needs in elementary schools (81% completed),

(ii) toilets for girls in secondary schools (68%

completed), and (iii) drinking water facilities

in secondary schools (83% completed). In

addition, the Committee noted that, out of 26 lakh sanctioned posts of cook-cum-helpers

under the Mid-Day Meal programme, 25 lakh

posts have been engaged (4% vacancy).

Moreover, out of 10 lakh kitchen-cum-stores

sanctioned, 8.5 lakh kitchen-cum-stores have

been created (92% complete). The Committee

highlighted that delay in completion of

infrastructure leads to cost overruns and

students’ dropouts in government schools.4

Pupil-teacher ratio

Experts have identified various issues concerning

the role of teachers to address the challenges

confronting elementary education.10 These

include: (i) low teacher accountability and

appraisal, (ii) poor quality of the content of

teacher-education and changes required in the

curriculum of B. Ed and D. Ed courses, (iii) need

for continuous in-service teacher training and

upgradation of skill set, (iv) inadequate pupil-

teacher ratio and deployment of teachers for non-

educational purposes, (v) teacher vacancies, and

(vi) excessive recruitment of contract/para

teachers.

Over the last few years, the number of teachers in

the schooling system has increased (from nearly

82 lakh in 2013-14 to nearly 89 lakh in 2016-17).7

This has led to a decline in the Pupil-Teacher

Ratio (PTR) across school education (from 31.3 in

2013-14 to 28.4 in 2016-17).8 PTR is defined as

the number of students per teacher. According to the RTE Act, 2009, the PTR should ideally be

lower than 30:1 at the primary level, and 35:1 at

the upper primary level. Amongst the states, only

Uttar Pradesh and Bihar do not meet the RTE

prescribed PTR at the primary level, with a PTR

of 39 and 36, respectively.


Development (2020) noted that 23% of total posts

of teachers (including elementary and secondary

levels) under Samagra Shiksha are vacant. The

states with comparatively higher vacancy include: (i) Jharkhand (48%), (ii) Uttarakhand (39%), (iii)

Kerala (39%), and (iv) Karnataka (33%). The

Impact of COVID-19 on school education

In March 2020, COVID-19 was declared a pandemic by the World Health Organisation, and a nationwide lockdown was imposed in India to contain the spread of the virus. The lockdown shifted the teaching mode from offline mode to online mode. In 2020-21, Rs 818 crore was shared by the central government across states to promote online learning, and Rs 268 crore was allocated for online teacher training under Samagra Shiksha to ensure professional development of teachers.9

The Economic Survey 2020-21 observes that, as of October 2020, the percentage of students in government and private schools owning a smartphone increased from 36.5% in 2018 to 61.8% in 2020 in rural India.

Further, to optimise the impact of COVID-19 pandemic on school education, the central government launched several initiatives. Some of these initiatives are as follows:

PM eVidya: The initiative was launched in May 2020 under the Aatma Nirbhar Bharat Abhiyaan. Under this initiative all states were provided access to various e-content through the web portal - DIKSHA. The e-content included courses for teachers, and quizzes. In addition, the initiative provided for Swayam Prabha channels, which helped in telecasting educational programmes for students who did not have internet access. The initiative also included a channel for differently abled children.9

Swayam MOOCs: 92 online massive open online courses were provided to open school students in Class 9-12. 9

National Repository of Open Educational Resources (NROER): NROER was created with around 17,500 e-contents for various school subjects in all classes.9

Manodarpan: This initiative was part of the Aatma Nirbhar Abhiyaan. It aimed at providing psychological support to students, parents, and teachers.9


- 89 -

Committee further highlighted that absence of

teachers in government schools encourages

parents to prefer private schools for their

children.4

The NEP 2020 also observes that the quality of

teacher education, recruitment, deployment, and

service conditions are not up to desired standards.

Further, it noted the significant teacher vacancies

across India. It also adds that poor service

conditions and culture, and lack of career

progression amongst teachers affects their

motivation and teaching quality.

Quality of learning

The National Achievement Survey (NAS) 2017

observed that nearly 53% of Class 3 students have

achieved grade proficiency levels.11 This means

that they can solve problems using simple logic,

apply simple rules, follow simple instructions, and

are able to use simple language to express

themselves. This proportion of students who are

grade proficient drops to 47% in Class 5 and to a

further 39% in Class 8. Note that NAS is

conducted for Class 3, 5, and 8 and it measures

learning level outcomes in language, mathematics,

and environmental studies (for Class 3 and 5), and language, mathematics, sciences, and social

sciences (for Class 8).11

Figure 4: Proficiency of learning at different

levels

Note: Below basic means learners at this level have not

achieved the required learning for this grade.

Sources: National Achievement Survey 2017, MHRD; PRS.

The Central Advisory Board on Education

(CABE, 2014), National Achievement Survey

(2012 and 2017), and the Economic Survey

(2016-17) also observed declining learning levels

in elementary education even after the

implementation of the Right to Education Act,

2009.12,13,14,15

Under the RTE Act, children are enrolled in the

Class that corresponds to their age, irrespective of

their learning levels. This results in a situation

where children may have different learning levels

within the same Class, depending on when they

are enrolled in the schooling system. To close the

gap in learning levels, the NEP 2020 has made

several recommendations such as reforms in

curriculum and nature of assessments and

improving foundational literacy and numeracy

through incorporating early childhood care and

education in the education system.6

The NEP 2020 also notes lack of foundational

literacy and numeracy as a reason behind poor

learning levels at subsequent stages of education.

It observed that more than five crore students

currently enrolled in elementary school (26% of

students) have not attained foundational literacy

and numeracy (the ability to read and understand

basic text and carry out basic addition and

subtraction). It recommends that every child

should attain foundational literacy and numeracy

by Class 3.

Similarly, the National Achievement Survey

(2015) for Class 10 indicate that 24% students

were in the range of 0-35% score and 61%

students were in the range of 36-50% score in

English. Further, 35% students were in 0-35%

scores, and 49% students were in the range of 36-

50% scores in Mathematics.16 No significant

differences were observed in the scoring pattern

on the basis of gender (boys and girls).

Curriculum

The National Education Policy 2020 noted that the

current curriculum system is based on rote

learning. The Policy specifies reduction in the

content of subjects to core essentials to enhance

critical thinking, and inquiry-based, discussion-

based, discovery-based, and analysis-based

learning.6

The Policy recommends various reforms in the

curriculum system to shift the system towards a

character and skill-building system. The reforms

include: (i) introduction of experiential learning

(such as hands-on learning, arts/sports-integrated

learning), (ii) eliminating significant separation

among curricular, extracurricular, or co-curricular

in certain streams, and (iv) promoting mother

tongue as medium of instruction, preferably till

Class 8 and beyond.6

Further, it recommended that the existing system

of exams be reformed. Board examinations

should test only core concepts and cover a range

of subjects. Students should be able to choose

their subjects and have the option to take the

exams on up to two occasions during a given year.

To track students’ progress throughout their

school experience, examinations will be

conducted in Class 3, 5, and 8. The examination

in Class 3 will test basic foundational literacy and


- 90 -

numeracy, and its results will only be used for the

improvement of the school education system.

Further, a National Assessment Centre will be set

up under the MHRD as a standard-setting body

for student assessment and evaluation.6

Note that under the RTE Act, the Continuous and

Comprehensive Evaluation (CCE) is the

evaluation mechanism for elementary education.

CCE (e.g., paper-pencil test, drawing and reading

pictures, and expressing orally) does not mean an

absence of an evaluation, but it means an

evaluation of a different kind from the traditional

system of examinations. It has been

recommended that proper design of assessment

and using this information can help improve the

quality and innovation in terms of teaching and

learning.17 However, the CABE (2014) noted that

CCE has not been adequately implemented or

monitored. It recommended that there is a need to

proactively communicate the intent of CCE

among teachers for its effective implementation.18

Department of Higher Education

In 2021-22, the Department of Higher Education

has been allocated Rs 38,351 crore (2% annual

increase over 2019-20). This is 41% of the total

budget allocation to the Ministry of Education. In

2020-21, the allocation for the department was Rs

39,467 crore, which was reduced to Rs 32,900

crore at the revised stage (17% decrease).

The allocation for the department has increased

annually by 9% between 2010-11 and 2021-22.

Figure 5 depicts the allocation to the Department

of Higher Education from 2010-11 to 2021-22.

Figure 5: Allocation to the Department of Higher Education (2010-22) (in Rs crore)

Note: Revised Estimates have been used for 2020-21 and

Budget Estimates for 2021-22.


Table 6 indicates utilisation of funds to the

department between 2010-11 and 2020-21.



Year Budget

Estimate Actuals

Utilisation % (Actuals/BE%)

2010-11 16,690 15,472 93%

2011-12 21,912 19,505 89%

2012-13 25,275 20,423 81%

2013-14 26,750 24,465 91%

2014-15 27,656 23,152 84%

2015-16 26,855 25,439 95%

2016-17 28,840 29,026 101%

2017-18 33,330 33,614 101%

2018-19 35,010 31,904 91%

2019-20 38,317 36,916 96%

2020-21 39,467 32,900* 83% Note: BE – Budget Estimate. *Revised Estimate


The utilisation has been over 90% of the budget

estimates in the last three years as seen in the table. In 2016-17 and 2017-18, the Department

exceeded its budget estimates, i.e., crossed 100%

utilisation.

Allocation to World Class Institutions in 2021-22

is Rs 1,710 crore (176% annual increase over

2019-20). The government has granted the status

of Institution of Eminence (IoE) to ten private

institutions and eight public institutions. These

institutions have greater autonomy in admitting

foreign students, fixing fees, and recruiting

foreign faculty. Further, each public institution

declared as an Institute of Eminence gets financial

assistance of up to Rs 1,000 crore over five years.

Table 7 provides the major heads of financial

allocation under the Department for 2021-22. In

2021-22, the highest share in the departmental

allocation is of grants to Central Universities and Indian Institutes of Technology (IITs) at 20%

each. Other expenditure heads with a high share

of allocation among others are statutory and

regulatory bodies (13%), and National Institutes

of Technology, and the Indian Institute of

Engineering Science and Technology (10%).

Allocation to World Class Institutions in 2021-22

is Rs 1,710 crore (176% annual increase over

2019-20). The government has granted the status

of Institution of Eminence (IoE) to ten private

institutions and eight public institutions.19 These

institutions have greater autonomy in admitting

foreign students, fixing fees, and recruiting

foreign faculty. Further, each public institution

declared as an Institute of Eminence gets financial

assistance of up to Rs 1,000 crore over five

years.20

-10%

0%

10%

20%

30%

40%

50%

-10,000

-

10,000

20,000

30,000

40,000

50,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Department of higher education

% change


- 91 -


Department of Higher Education, 2021-22 (in

Rs crore)

Major Head 19-20

Actuals 20-21 RE

21-22 BE

Annualised Change

IITs 6,596 6,841 7,686 8%

Grants to Central Universities

7,989 8,634 7,643 -2%

Statutory and regulatory bodies (UGC and AICTE)

4,872 4,860 5,109 2%

National Institutes of Technology and IIEST

3,487 3,265 3,935 6%

Rashtriya Uchhatar Shiksha Abhiyan (RUSA)

1,278 166 3,000 53%

Student Financial Aid

2,070 1,208 2,482 10%

World Class Institutions

224 1,101 1,710 176%

Indian Institutes of Science, Education, and Research (IISERs)

791 993 946 9%

Digital India-e-learning

458 305 646 19%

Indian Institute of Science (IISc)

596 605 622 2%

Indian Institutes of Management

481 465 476 -1%

Indian Institutes of Information Technology (IIITs)

328 339 393 9%

Research and Innovation

257 284 237 -4%

Others 7,490 3,833 3,465 -32%

Grand Total 36,916 32,900 38,351 2% Sources: Expenditure Budget 2021-22; PRS.

Issues in the higher education sector

Enrolment

As of 2018-19, GER in higher education in India

is 26.3%.21 A GER of 26.3% implies that 26.3%

of people in the target age-group are enrolled in

universities.

The States/Union Territories with comparatively

higher GER in 2018-19 include Sikkim (53.9%),

Tamil Nadu (49%), Delhi (46%), and Himachal

Pradesh (39.6%), among others.21

Figure 6: GER in higher education (2014-19)

Sources: All India Survey on Higher Education, 2018-19;

PRS.

The Standing Committee (2016) had noted that

the Gross Enrolment Ratio (GER) in higher

education in the country has increased due to the

government of India’s efforts of setting up new

Central Universities in the country, including

Indian Institutes of Information Technology

(IIITs).22

The All-India Survey on Higher Education 2018-

19 report reveals that enrolment decreases as one

goes further higher from undergraduate

education.21 Out of the total number of students

enrolled in higher education, the highest

enrolment is at the undergraduate level (79.8%)

followed by postgraduate (10.8%). With regard to

the types of disciplines studied, most students at

the undergraduate level are enrolled in the Arts

stream (33%), followed by Science (16%), Commerce (14%), and Engineering & Technology

(13%). The leading stream at the post-graduate

level is social Science, followed by Management.

At the Ph.D. level, the majority of the students

chose Science in 2018-19.

The NEP 2020 aims to increase the GER in

higher education to 50% by 2035. This will be

achieved by improvement in the capacity of

existing higher education institutes by

restructuring and expanding existing

institutes.6

Further, NEP 2020 recommends that all

institutes should aim to be large

multidisciplinary institutes (with enrolments in

thousands), and there should be one such

institution in or near every district by 2030.

Further, institutions should have the option to

run open distance learning and online

programmes to enhance the reach of higher

education.6

Regulation of higher education

The NEP 2020 observes that higher education in

India has been overly regulated with too little

effect. It noted problems of concentration of

power, conflict of interest, and a resulting lack of

accountability in higher education regulation.

24.3% 24.5% 25.2% 25.8% 26.3%

0%

5%

10%

15%

20%

25%

30%

2014-15 2015-16 2016-17 2017-18 2018-19


- 92 -

In India, higher education is regulated by multiple

authorities. The University Grants Commission

(UGC) regulates universities and colleges

teaching general subjects. It is empowered with

disbursing grants to universities for their

maintenance and development, and with

regulating fees charged by them. It also has

powers regarding the recognition, functioning, and de-recognition of deemed universities. Failure to

comply with UGC standards may result in

withdrawal of grants or termination of affiliation

of a college to a university if the college does not

comply with fee structure and other regulations.23

The All-India Council for Technical Education

(AICTE) regulates universities or colleges

offering technical courses such as engineering and

management. These institutions are required to

comply with the academic standards and

regulations set by AICTE.24 Additionally,

institutions offering courses related to medical, legal, nursing, or architectural education are

regulated by 15 professional councils such as the

Medical Council and the Bar Council. These

councils also conduct qualifying examinations for

entering the profession.

For setting quality standards and accreditation,

there are, currently, two accrediting institutions:

(i) the National Board of Accreditation (NBA)

established by AICTE, and (ii) the National

Assessment and Accreditation Council (NAAC)

established by UGC. The National Knowledge Commission (2009) had noted that only 10% of

all institutions had been accredited.25 The

Standing Committee on Human Resource

Development (2016) noted that accreditation of

higher educational institutions needs to be at the

core of the regulatory arrangement in higher

education.22 Further, the Committee recommends

that credit rating agencies, reputed industry

associations, and professional bodies should be

encouraged to rate Indian universities and

institutions.


Development (2020) noted higher education to be

of global importance.26

The Committee recommended alignment of the

higher education system in India with global

standards by developing graduates with new

1 ‘Social Infrastructure, Employment, and Human

Development’, Chapter 10, Economic Survey, 2019-20,

Ministry of Finance,

https://www.indiabudget.gov.in/economicsurvey/doc/vol2chap

ter/echap10_vol2.pdf. 2 Expenditure Budget 2021-22, Ministry of Finance, February

2021, https://www.indiabudget.gov.in/doc/eb/allsbe.pdf. 3 Budget Speech 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf.

skills, a broad knowledge base, and competencies.

The Committee noted that this could be achieved

by: (i) upgrading existing institutions, (ii)

allocating more funds towards university-based

research, and (iii) promoting collaborations

among institutions.

The NEP 2020 has recommended a complete

overhaul of the higher education regulatory

structure. It states that the distinct functions of

regulation, accreditation, funding, and setting

academic standards should be performed by

separate, independent bodies to minimise the

conflict of interest and eliminate the concentration

of power.

The Finance Minister stated that the legislation, to

set up the Higher Education Commission of India,

will be introduced in 2021-22. The Commission

will act as an umbrella body with four separate

arms for: (i) standard-setting, (ii) accreditation,

(iii) regulation, and (iv) funding.3

Teacher related issues

As of September 2020, 6,210 teaching posts are

vacant across 42 central universities which come

within the purview of the Ministry of Education.27


Development (2016) noted that this could be due

to two reasons: (i) young students don’t find the

teaching profession attractive, or (ii) the

recruitment process is long and involves too many

procedural formalities.22

The Standing Committee on Education, Women,

Children, Youth, and Sports (2021) noted that the current evaluation system of faculty recruitment is

ineffective.28 The Committee recommends

transforming the National Eligibility Test to align

with the latest modes of teaching and research.

Further, the Committee observes a need for a

mechanism to monitor faculty induction and

development.

The NEP 2020 states that National Professional

Standards for Teachers will be developed by

2022. The standards will specify expectations

from a teacher at different levels of expertise. These standards will be revised in 2030 and

thereafter every ten years to ensure the efficacy of

the system.

4 Report No. 312, Demand for Grants 2020-21 of the

Department of School Education and Literacy, Standing

Committee on Human Resource Development, March 5, 2020,

https://rajyasabha.nic.in/rsnew/Committee_site/Committee_Fil

e/ReportFile/16/123/312_2020_3_12.pdf. 5 Static Reports, UDISE+ Dashboard, Ministry of Human

Resource Development, accessed on February 9, 2021,

http://dashboard.seshagun.gov.in/mhrdreports/#/reportDashboa

rd/sReport. 6 National Education Policy 2020, Ministry of Human

Resource Development,







http://dashboard.seshagun.gov.in/mhrdreports/#/reportDashboard/sReport

http://dashboard.seshagun.gov.in/mhrdreports/#/reportDashboard/sReport


- 93 -

https://www.education.gov.in/sites/upload_files/mhrd/files/NE

P_Final_English_0.pdf. 7 UDISE Flash Statistics 2016-17, National Institute of

Education Planning and Administration,

http://udise.in/Downloads/Publications/Documents/Flash_Stati

stics_on_School_Education-2016-17.pdf. 8 Educational Statistics at a Glance 2018, Ministry of Human


https://www.education.gov.in/sites/upload_files/mhrd/files/stat

istics-new/ESAG-2018.pdf. 9 Economic Survey 2020-21,

https://www.indiabudget.gov.in/economicsurvey/. 10 “Vision of Teacher Education in India: Quality and

Regulatory Perspective”, Report of the High-Powered

Commission on Teacher Education constituted by the Supreme

Court of India, August 2012, Ministry of Human Resource

Development.

11 National Achievement Survey-2017, Ministry of Human


https://ncert.nic.in/pdf/NAS/WithReleaseDate_NPPTL.pdf. 12 “Report of CABE Sub Committee on Assessment on

implementation of CCE and no detention provision”, 2015,

Ministry of Human Resource

Development, http://mhrd.gov.in/sites/upload_files/mhrd/files/

document-reports/AssmntCCE.pdf. 13 A summary of India’s National Achievement Survey, Class

VIII, 2012, National Council of Educational Research and

Training,

http://mhrd.gov.in/sites/upload_files/mhrd/files/upload_docum

ent/11-March-National-Summary-Report-NAS-Class-VIII.pdf. 14 National Achievement Survey 2017, Dashboard,

http://nas.schooleduinfo.in/dashboard/nas_ncert#/. 15 Economic Survey, 2016-17,

http://indiabudget.nic.in/es2016-17/echapter_vol2.pdf. 16 National Achievement Survey (2015), Class X, National

Council of Educational Research and Training,

http://www.ncert.nic.in/departments/nie/esd/pdf/NASSummary

.pdf. 17 World Development Report, 2018, World Bank,

http://www.worldbank.org/en/publication/wdr2018.

18 “Report of CABE Sub Committee on Assessment on

implementation of CCE and no detention provision”, Ministry

of Human Resource Development, 2014,

http://mhrd.gov.in/sites/upload_files/mhrd/files/document-

reports/AssmntCCE.pdf. 19 20 Institution recommended for status of ‘Institutions of

Eminence’, Press Information Bureau, Ministry of Human

Resource Development, August 2, 2019. 20 Lok Sabha, Unstarred Q No. 44, Ministry of Human

Resource Development, Answered on November 18, 2019,

http://loksabhaph.nic.in/Questions/QResult15.aspx?qref=6362

&lsno=17. 21 All India Survey on Higher Education, 2018-19, Ministry of

Human Resource and Development, Department of Higher

Education,

http://aishe.nic.in/aishe/viewDocument.action?documentId=26

2. 22 Report No. 284 – Issues and Challenges before Higher

Education Sector in India, Standing Committee on Human

Resource Development, December 14, 2016,


e/ReportFile/16/16/284_2017_4_11.pdf 23 University Grants Commission Act, 1956,

https://www.ugc.ac.in/oldpdf/ugc_act.pdf. 24 All India Council for Technical Education Act, 1987,

http://legislative.gov.in/sites/default/files/A1987-52.pdf. 25 “Report to the Nation: 2006-2009”, National Knowledge

Commission, March 2009, http://www.aicte-

india.org/downloads/nkc.pdf. 26 Report No. 313 – Demand for Grants 2020-21 of the

Department of Higher Education, Standing Committee on

Human Resource Development, March 5, 2020,


e/ReportFile/16/144/313_2021_1_16.pdf. 27 Lok Sabha, Unstarred Question No. 202, Vacant teachers

and other staff posts, Ministry of Education, September 14,

2020. 28 Report No. 322, Standing Committee on Education, Women,

Children, Youth and Sports, February 2, 2021,


e/ReportFile/16/144/322_2021_2_17.pdf.

https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Final_English_0.pdf


http://udise.in/Downloads/Publications/Documents/Flash_Statistics_on_School_Education-2016-17.pdf

http://udise.in/Downloads/Publications/Documents/Flash_Statistics_on_School_Education-2016-17.pdf

https://www.education.gov.in/sites/upload_files/mhrd/files/statistics-new/ESAG-2018.pdf

https://www.education.gov.in/sites/upload_files/mhrd/files/statistics-new/ESAG-2018.pdf


https://www.education.gov.in/sites/upload_files/mhrd/files/document-reports/JVC%20Vol%201.pdf

https://www.education.gov.in/sites/upload_files/mhrd/files/document-reports/JVC%20Vol%201.pdf

https://ncert.nic.in/pdf/NAS/WithReleaseDate_NPPTL.pdf

http://mhrd.gov.in/sites/upload_files/mhrd/files/document-reports/AssmntCCE.pdf


http://mhrd.gov.in/sites/upload_files/mhrd/files/upload_document/11-March-National-Summary-Report-NAS-Class-VIII.pdf

http://mhrd.gov.in/sites/upload_files/mhrd/files/upload_document/11-March-National-Summary-Report-NAS-Class-VIII.pdf

http://nas.schooleduinfo.in/dashboard/nas_ncert#/

http://indiabudget.nic.in/es2016-17/echapter_vol2.pdf

http://www.ncert.nic.in/departments/nie/esd/pdf/NASSummary.pdf

http://www.ncert.nic.in/departments/nie/esd/pdf/NASSummary.pdf

http://www.worldbank.org/en/publication/wdr2018



http://loksabhaph.nic.in/Questions/QResult15.aspx?qref=6362&lsno=17

http://loksabhaph.nic.in/Questions/QResult15.aspx?qref=6362&lsno=17





https://www.ugc.ac.in/oldpdf/ugc_act.pdf

http://legislative.gov.in/sites/default/files/A1987-52.pdf

http://www.aicte-india.org/downloads/nkc.pdf

http://www.aicte-india.org/downloads/nkc.pdf






- 94 -

Annexure

Table 8: Allocations to the Ministry of Education for 2021-22 (in Rs crore)

Major Heads 2019-20 Actuals

2020-21 Budget

2020-21 Revised

% Change from 2020-21 Budget

to 2020-21 Revised

2021-22 Budgeted

Annualised change

from 2019-20 Actuals to 2021-22

Budget

Department of School Education and Literacy 52,520 59,845 52,189 -13% 54,874 2%

Autonomous bodies 10,077 9,205 10,395 13% 11,192 5%

National Education Mission 32,377 38,861 28,078 -28% 31,300 -2%

-Samagra Shiksha 32,377 38,751 27,957 -28% 31,050 -2%

-Teachers Training and Adult Education - 110 120 9% 250 -

National Programme of Mid-Day Meal in Schools 9,699 11,000 12,900 17% 11,500 9%

National Means cum Merit Scholarship Scheme 331 373 350 -6% 350 3%

Others 36 407 467 15% 532 282%

Department of Higher Education 36,916 39,467 32,900 -17% 38,351 2%

Student Financial Aid 2,070 2,316 1,208 -48% 2,482 10%

Digital India-e-learning 458 444 305 -31% 646 19%

Research and Innovation 257 307 284 -8% 237 -4%

Statutory and regulatory bodies (UGC and AICTE) 4,872 5,109 4,860 -5% 5,109 2%

Grants to Central Universities 7,989 7,643 8,634 13% 7,643 -2%

Indian Institutes of Technology 6,596 7,332 6,841 -7% 7,686 8%

Indian Institutes of Management 481 476 465 -2% 476 -1%

National Institutes of Technology and IIEST 3,487 3,885 3,265 -16% 3,935 6%

Indian Institute of Science, Education and Research (IISERs)

791 896 993 11% 946 9%

Indian Institute of Science (IISc) 596 592 605 2% 622 2%

Indian Institutes of Information Technology (IIITs) 328 393 339 -14% 393 9%

World Class Institutions 224 500 1,101 120% 1,710 176%

Rashtriya Uchhatar Shiksha Abhiyan (RUSA) 1,278 300 166 -45% 3,000 53%

Improvement in Salary Scale of University and College Teachers

1800 1,900 348.51 -82% 10 -93%

Higher Education Financing Agency (HEFA) 2,100 2,200 200 -91% 1 -98%

Others 3,590 5,172 3,284 -36% 3,454 -2%

Total 89,437 99,312 85,089 -14% 93,224 2%

Sources: Expenditure Budget 2021-22; PRS.


- 95 -

Indicators on school and higher education

Table 9: Enrolment in education in 2016-17 (as a percentage of respective population)

State/ UT

GER in Elementary Education (Class 1-8)

GER in Secondary Education

(Class 9-12) GER in Higher

Education (Beyond Class 12)

Primary Upper

Primary Total

Elementary Secondary

Higher Secondary

Andhra Pradesh 82.8 82.1 82.5 76.3 60.6 32.4

Arunachal Pradesh 106.2 119.9 110.4 85.9 51.2 29.7

Assam 107.4 96.7 103.7 78.6 39.7 18.7

Bihar 98.1 103.9 99.9 76.7 28.8 13.6

Chhattisgarh 97.1 100.8 98.5 87.7 54.5 18.6

Goa 101.3 97.1 99.7 99.3 78.7 30.1

Gujarat 95.0 97.2 95.8 74.5 43.2 20.4

Haryana 93.9 94.4 94.1 86.3 60.8 29.2

Himachal Pradesh 97.9 103.0 99.8 103.9 92.0 39.6

Jammu & Kashmir 77.1 66.2 73.0 61.7 52.9 30.9

Jharkhand 96.6 91.8 95.0 63.5 37.1 19.1

Karnataka 103.7 92.9 99.7 84.4 41.9 28.8

Kerala 95.1 93.6 94.6 99.4 79.4 37.0

Madhya Pradesh 92.1 89.7 91.3 80.2 47.1 21.5

Manipur 120.6 119.3 120.2 86.5 64.4 33.7

Maharashtra 97.5 98.7 97.9 91.7 70.7 32.0

Meghalaya 129.1 128.0 128.8 83.3 40.6 25.8

Mizoram 115.7 127.5 119.3 95.9 54.6 25.7

Nagaland 81.7 90.4 84.4 61.8 36.3 18.7

Odisha 100.2 94.6 98.1 79.9 40.1 22.1

Punjab 99.3 97.7 98.7 87.1 72.2 29.5

Rajasthan 97.8 92.0 95.8 76.6 60.3 23.0

Sikkim 92.0 136.8 106.9 112.0 64.2 53.9

Tamil Nadu 102.0 93.4 98.6 93.9 83.7 49.0

Telangana 98.6 86.9 94.1 81.8 50.6 36.2

Tripura 102.4 126.4 110.0 112.3 41.9 19.2

Uttar Pradesh 87.2 72.7 82.1 67.8 59.0 25.8

Uttarakhand 96.4 86.7 92.7 84.4 77.1 39.1

West Bengal 96.3 96.3 96.3 78.6 50.9 19.3

Andaman & Nicobar Islands 86.9 83.1 85.4 84.1 72.8 23.2

Chandigarh 80.1 95.6 85.8 89.7 83.2 50.6

Dadra & Nagar Haveli 82.9 91.6 86.0 91.2 51.8 9.3

Daman & Diu 84.0 81.1 82.9 73.3 34.6 5.5

Delhi 109.2 129.0 115.9 114.4 74.2 46.3

Lakshadweep 70.0 81.4 79.8 105.7 97.9 7.4

Puducherry 85.6 84.8 85.3 87.5 74.2 46.4

India 95.1 90.7 93.6 79.4 55.4 26.3

Note: Enrolment rate can exceed 100% due to early or late school entrance and grade repetition, or for example, children not in the 6-14

age group still being enrolled in elementary school. Data for higher education is of 2018.

Sources: Flash Statistics, UDISE 2016-17; AISHE 2018-19, Ministry of Human Resource Development; PRS.


- 96 -

Figure 7: State-wise GER in Elementary Education (Class 1-8) in 2016-17

Sources: All India Survey on Higher Education 2018-19, MHRD; PRS.

Figure 8: State-wise spending on Education (2020-21)

Sources: State budget documents 2020-21; PRS.

32.4

%

29.7

%

18.7

%

13.6

%

18.6

%

46.3

%

30.1

%

20.4

% 29.2

%

39.6

%

30.9

%

19.1

%

28.8

% 37.0

%

21.5

%

32.0

%

18.7

%

22.1

% 29.5

%

23.0

%

53.9

%

49.0

%

36.2

%

19.2

% 25.8

%

39.1

%

19.3

%

0%

10%

20%

30%

40%

50%

60%

AP AR AS BR CG DL GA GJ HR HP JK JH KA KL MP MH NL OD PB RJ SK TN TS TR UP UK WB

12.1

%

19.2

%

19.3

%

19.7

%

26.0

%

15.3

%

14.3

% 17.0

%

18.3

%

16.6

%

16.5

%

13.0

%

14.6

% 18.2

%

12.2

%

22.9

%

13.5

%

14.6

%

12.3

%

19.3

%

16.6

%

15.0

%

7.4%

14.6

%

13.6

%

18.9

%

17.6

%

0%

5%

10%

15%

20%

25%

30%

AP AS BR CG DL GA GJ HR HP JK JH KA KL MH MN MZ NL OD PB RJ SK TN TS TR UP UK WB

- 97 -

Demand for Grants: Health and Family

Welfare

The Ministry of Health and Family Welfare has

two departments: (i) the Department of Health and

Family Welfare, and (ii) the Department of Health

Research. The Department of Health and Family

Welfare is responsible for functions including: (i)

implementing health schemes, and (ii) regulating

medical education and training. The Department of

Health Research is broadly responsible for conducting medical research. This note analyses

the financial allocation trends and key issues

concerning the health sector.


Overall, India’s public health expenditure has

increased from 0.9% of GDP in 2015-16 to 1.1% of

GDP in 2020-21.1,2,3,4 The Economic Survey 2020-

21 observed that India ranks 179th among 189

countries in prioritising healthcare in the

government budget. Note that the National Health

Policy, 2017 aims to increase public health

expenditure to 2.5% of the GDP by 2025.

In 2021-22, the Ministry has an allocation of Rs

73,932 crore (an annualised growth of 7% over the

actual expenditure in 2019-20).5 Under the

Ministry, the Department of Health and Family

Welfare accounts for 96% of the Ministry’s

allocation at Rs 71,269 crore whereas the

Department of Health Research has been

allocated Rs 2,663 crore (4% of the allocation).

Table 1: Budget allocation for the Ministry of

Health and Family Welfare (in Rs crore)

Item 2019-20 Actuals

2020-21 RE

2021-22 BE

Annualised Change (Actuals

2019-20 to BE 2021-22)

Health & Family Welfare

62,397 78,866 71,269 7%

Health Research

1,861 4,062 2,663 20%

Total 64,258 82,928 73,932 7% Note: BE – Budget Estimate; RE – Revised Estimates.


The revised estimate in 2020-21 (Rs 82,928 crore)

includes Rs 14,217 crore for COVID-19 emergency

response and health system preparedness package,

and COVID-19 vaccination for healthcare and

frontline workers. Table 2 details the main heads

of expenditure under the Ministry allocated for the

year 2021-22.

Table 2: Main heads of expenditure (in Rs

crore)


2020-21 RE

2021-22 BE

Annualised Change

(Actuals 19-20 to BE 21-

22)

National Health Mission (total)

34,660 35,144 36,576 3%

Autonomous Bodies

9,601 9,882 10,924 7%

PMJAY 3,200 3,100 6,400 41%

PMSSY 4,683 7,517 7,000 22%

National AIDS & STD Control Programme

2,813 2,900 2,900 2%

Family Welfare Schemes

489 496 387 -11%

RSBY 57 29 1 -87%

Others 8,755 23,860* 9,744 5%

Total 64,258 82,928 73,932 7% Note: * Includes Rs 14,217 crore for COVID-19 emergency

response and vaccination of healthcare and frontline workers;

BE - Budget Estimate; RE - Revised Estimates; PMJAY:

Pradhan Mantri Jan Arogya Yojana; PMSSY- Pradhan Mantri

Swasthya Suraksha Yojana; RSBY: Rashtriya Swasthya Bima

Yojna; Autonomous Bodies include AIIMS, and ICMR.



The Finance Minister, Ms. Nirmala Sitharaman stated that health and well-being is one of the key pillars for the budget. Key highlights in the budget regarding health and well-being include:

▪ Urban Swacch Bharat Mission 2.0 will be implemented with a capital outlay of Rs 1.4 lakh crores over five years (2021-26). The objectives of the Mission include: (i) complete faecal sludge management, (ii) reduction in single use plastic, (iii) source segregation of garbage, and (iv) reduction in air pollution.

▪ A new central scheme PM AtmaNirbhar Swasth Bharat Yojana will be launched with an outlay of Rs 64,180 crore over six years. The scheme will be focused on: (i) developing primary, secondary, and tertiary healthcare systems, (ii) strengthening existing national institutions, and (iii) creating new institutions for detection and cure of new diseases.

▪ Rs 35,000 crore has been allocated for COVID-19 vaccine under the Ministry of Finance.

Apart from the budget allocation to the Ministry of Health and Family Welfare: (i) Rs 13,192 crore has been allocated as finance commission grant for health, (ii) Rs 36,022 crore has been allocated as finance commission grant for water and sanitation.

Demand for Grants 2021-22 Analysis: Health and Family Welfare PRS Legislative Research

- 98 -

Trends in allocation and expenditure

In the last 16 years, the allocation to the

Department of Health and Family Welfare has

increased from Rs 11,366 crore in 2006-07 (revised

estimate) to Rs 71,269 crore in 2021-22 (budget

estimate). Over the period 2006-22, the Compound

Annual Growth Rate (CAGR) has been 13%.

CAGR is the annual growth rate over a certain

period of time.

The utilisation has been over 100% in the last five

years, i.e., the Department exceeded its budget

estimates. In 2020-21 (revised estimates), the

Department is expected to exceed the budget

estimate by 21%. Overall, the Ministry is expected

to have an additional spending of Rs 15,817 crore

at the revised stage in 2020-21. Out of this, Rs

14,217 crore will be spent for COVID-19

emergency response and health system

preparedness package, and COVID-19 vaccination

for healthcare and frontline workers.

COVID-19 vaccine

On January 3, 2020 DCGI approved two vaccines (Covishield and COVAXIN) for restricted use in emergency situation. 6 Restricted use in emergency situation refers to approving the use of vaccines only for people who are in urgent need considering their vulnerability to the virus.

Table 3: Status of COVID-19 vaccine candidates in India Company Name Clinical Stage

Bharat Biotech COVAXIN Phase 3 ongoing (received restricted use authorisation)

Serum Institute of India/ICMR Covishield (AstraZeneca/ Oxford)

Phase 3 completed (received restricted use authorisation)

Zydus Cadilla ZyCoV-D Phase 2 ongoing; Phase 3 approval granted

Dr Reddy’s Laboratories and Sputnik LLC Sputnik Phase 2 ongoing

Biological E Biological E Phase 1 / 2 ongoing

Notes: *ICMR: Indian Council for Medical Research. Sources: COVID-19 Vaccines undertrial in India, Indian Council for Medical Research, Ministry of Health and Family Welfare.

Note that some countries such as United States of America issued emergency use authorisation for COVID-19 vaccines.7 Emergency Use Authorisation (EUA) refers to approving the use of unapproved medical products, or unapproved uses of approved medical products during public health emergencies (such as COVID-19 pandemic).

The Standing Committee on Home Affairs (2020) noted that in India no EUA has been given in the past by CDSCO. The Committee recommended that proper consideration and caution should be taken in case of issuing any EUA. The Committee added that the provision of EUA should be used in the rarest of rare cases.8

Development and financing: In 2020-21, the Ministry of Health and Family Welfare supported the development of approximately 30 COVID-19 vaccine candidates.9

In 2020-21, ICMR was allocated Rs 25 crore for studies and research on the development of a vaccine, and the Department of Biotechnology spent Rs 75 crore to support eight proposals for vaccine development by private industries and academia. In November 2020, the Department of Biotechnology received a grant of Rs 900 crore in form of a stimulus package (Mission COVID Suraksha) from the Ministry of Science and Technology. The Department of Science and Technology supported three projects (committed expenditure: Rs 3.2 crore; sanctioned expenditure: Rs 22.3 lakh), under Intensified Research in High Priority Areas (IRHPA), on COVID-19 vaccine.

Further, an expenditure of Rs 2,475 crore was approved by the central government under the World Bank funded India Covid-19 Emergency Response and Health System Preparedness Package for procurement of various components such as testing kits, testing machines, and reagents for COVID-19.10

In 2020-21, it is estimated that overall, the Ministry of Health and Family Welfare will spend Rs 13,857 crore on COVID-19 Emergency Response and Health System Preparedness Package and Rs 360 crore on COVID-19 vaccination for healthcare workers and frontline workers.

Distribution: The central government, in coordination with the state governments, identified the priority group for vaccination.11 The priority group comprised of two groups: (i) first group of one crore healthcare workers and two crore frontline workers, and (ii) second group 27 crore adults over 50 years of age and persons below 50 years of age with comorbidities.12

The Standing Committee on Health and Family Welfare (2020) had noted that an approach of smart vaccination may be opted for immediate control of pandemic provided the entire population is vaccinated eventually.28 Smart vaccination refers to a strategy in which the people of India are divided into three groups: (i) core group, (ii) bridge group, and (iii) general population. Once the core group is vaccinated, with all preventive measures such as wearing masks the pandemic may be contained without vaccinating the entire population of the country.28


- 99 -

Figure 1: Allocation to the Department of

Health and Family Welfare (2010-22) (Rs crore)

Note: Revised Estimate has been 2020-21; For 2021-22, %

change in allocation is 2021-22 BE over 2020-21 RE; BE –

Budget Estimate; RE – Revised Estimate. Sources: Union Budgets, 2006-07 to 2021-22; PRS.

Table 4 indicates the actual expenditure of the Department of Health and Family Welfare

compared with the budget estimates of that year

(2010-11 to 2020-21).



Year BE Actuals % Utilisation (Actuals/BE)

2010-11 23,530 22,765 97%

2011-12 26,897 24,355 91%

2012-13 30,702 25,133 82%

2013-14 33,278 27,145 82%

2014-15 35,163 30,626 87%

2015-16 29,653 33,121 112%

2016-17 37,062 37,671 102%

2017--18 47,353 51,382 109%

2018-19 52,800 52,954 100%

2019-20 62,659 62,397 100%

2020-21 65,012 78,866* 121%

Note: BE – Budget Estimates; *Revised Estimate.


Major schemes and issues

National Health Mission

The National Health Mission (NHM) consists of

two sub missions, the National Rural Health

Mission (NRHM) (focused on rural areas) and the

National Urban Health Mission (NUHM) (focused

on urban areas). NHM aims at strengthening

public health systems and healthcare delivery.

The various components under NHM include: (i)

reproductive, maternal, newborn and child health

services (RCH Flexi Pool), (ii) NRHM Flexi Pool

for strengthening health resource systems,

innovations, and information, (iii) immunisation

including the Pulse Polio Programme, (iv)

infrastructure maintenance, and (v) National

Disease Control Programme.

The allocation for NHM in 2021-22 (Rs 36,576

crore) is 4% higher than the revised estimates of

2020-21. Under the NHM, the rural component,

i.e., the National Rural Health Mission has been

allocated Rs 30,100 crore, (0.2% annual increase

over 2019-20). The allocation for National Urban

Health Mission is Rs 1,000 crore in 2021-22 (8%

annual increase over 2019-20).

Note that, significant funding for NHM is done

through flexible pools, such as RCH flexible pool,

and flexible pool for communicable diseases. The

rationale for creating of the flexible pool is to allow

more financial flexibility in allocation of funds

among RCH services and efficient distribution of

funds to obtain desired health outcomes. In 2021-

22, Rs 8,451 crore was allocated towards the

flexible pools, which is 8% annual decrease over

2019-20.

The Phase-I results of National Family Health

Survey-5 indicate certain improvements as

compared to those in National Family Health

Survey-4. These include: (i) expeditious increase

in full immunization coverage, (ii) increase in

households with improved sanitation facility and

clean cooking fuel across 22 states, and (iii)

increase in institutional births.13

Table 5: Allocation towards flexible pools in 2021-22 (in Rs crore)

Major Heads 19-20

Actuals 20-21

RE 21-22

BE

Annualised Change (Actuals

2019-20 to BE 2021-22)

Flexible Pool for Communicable Diseases

3,357 2,110 2,178 -19%

Flexible Pool for Non-Communicable

675 404 - -100%

RCH Flexible Pool

5,902 - 6,273 3%

Total 9,934 2,514 8,451 -8%

Note: RCH flexible pool includes Routine Immunization

Programme, Pulse Polio Immunization Programme and National

Iodine Deficiency Disorders Control Programme.


Table 6 shows the status of some key targets under

the NHM framework.

-20%

0%

20%

40%

60%

80%

-20,000

30,000

80,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Department of Health and Family Welfare expenditure

% change in allocation


- 100 -

Table 6: Status of some key targets of NHM Targets (2012-20) Latest Status

Reduce IMR to 25 IMR has reduced to 32 in 2018.

Reduce MMR to 100/1,00,000 live births

MMR has reduced to 113 in 2016-18.

Reduce TFR to 2.1 TFR has reduced to 2.2 in 2018.

Annual Malaria Incidence to be < .001

Annual Malaria Incidence is 0.02 in 2019.

Less than 1 % microfilaria prevalence in all districts

Out of 256 endemic districts, 99 have reported incidence less than 1% till 2018.

Reduce annual prevalence and mortality from Tuberculosis by half

Incidence reduced from 300 per lakh in 1990 to 204 per lakh in 2017.

Note: IMR-Infant Mortality Rate; MMR-Maternal Mortality

Rate; TFR-Total Fertility Rate.

Source: Health and Family Welfare Statistics 2019-20; Special

Bulletin on maternal Mortality in India 2016-18; National

Family Health Survey-4 (2015-16); Unstarred Question No.

4335, Ministry of Health and Family Welfare, Lok Sabha,

December 13, 2019; PRS.

Health infrastructure and enhancing service

delivery by training human resources in healthcare

are crucial for achieving objectives of the National

Health Mission. Healthcare infrastructure in India

can be categorised into physical infrastructure and

human resources who provide medical services.

Physical infrastructure

Depending on the level of care required, healthcare

in India is broadly classified into three types. This

classification includes primary care (provided at

primary health centres), secondary care (provided

at district hospitals), and tertiary care institutions

(provided at specialised hospitals like AIIMS).

Primary health care infrastructure provides the first

level of contact between health professionals and

the population.14

Broadly, based on the population served and the

type of services provided, primary health

infrastructure in rural areas consists of a three-tier

system. This includes Sub-Centres (SCs), Primary

Health Centres (PHCs), and Community Health

Centres (CHCs).15

The High Level Group on Health Sector (2019) and

the report of 15th Finance Commission on

Ayushman Bharat have observed that focus on

prevention and early management of health

problems can reduce the need for complicated specialist care provided at the tertiary level.17,20 It

recommended that the focus of healthcare provision

in the country should be towards providing primary

healthcare.

The Finance Minister announced that PM

AtmaNirbhar Swasth Bharat Yojana will be

launched with an outlay of Rs 64,180 crore over six

years. The scheme will be focused at: (i)

developing primary, secondary, and tertiary

healthcare systems, (ii) strengthening existing

national institutions, and (iii) creating new

institutions for detection and cure of new diseases.

The number of SCs, PHCs, and CHCs in 2005 and

2019 respectively across rural and urban areas are

given in Figure 2.

Figure 2: Number of Sub Centres, PHCs, and

CHCs (2005 and 2019)

Note: PHC – Primary Health Centre; CHC: Community Health

Centre.

Source: Comparative Statement, Rural Health Statistics 2017-

19; PRS.

The government plans to transform 1.5 lakh sub

healthcare centres, primary health centres and

urban primary health centres into Health Wellness

Centres (HWCs) by 2022. HWCs will provide

various range of services beyond maternal and

child healthcare services. These services will

include: (i) care for non -communicable diseases,

(ii) rehabilitative care, (iii) mental health services,

(iv) first level care for emergencies and trauma, and

(v) free essential drugs and diagnostic services.16

Further, the High Level Group noted that India has

1 bed per 1,000 people, which is significantly less

than the global average of 2.9 beds.17,18 The

National Health Policy, 2017 plans to increase this

to 2 beds per 1,000 people.17 This could be

achieved by creating 3,000 to 5,000 hospitals with

200 beds each by 2025.17

Human resources in health

The Economic Survey 2020-21 observed that the

aggregate density of health workers is 23 per

10,000 population, which is significantly lower

than that recommended by World Health

Organisation (WHO) (44.5 health workers per

10,000 population) to achieve the Sustainable

Development Goals (SDG) targets by 2030.4 As of

2019, there is 1 doctor per 1,511 people and 1 nurse

per 670 people, which is lower than the WHO

standard of 1 doctor per 1,000 people and 1 nurse

per 300 people.17 Note that despite the increase in

total number of health workers, there is shortfall of

doctors, specialists, and surgeons. For example,

the number of health workers (female) (including auxiliary nurse midwives) has increased from

1,33,194 in 2005 to 2,19,326 in 2018.15 As of

2018, 11% positions of doctors are vacant in

-

60,000

1,20,000

1,80,000

Sub-centres PHC CHC

2005 2019


- 101 -

primary health centres, and only 60% of total

required specialists have been approved for

appointment in primary health centres.15

Pradhan Mantri Jan Arogya Yojana (PMJAY)

The Ayushman Bharat programme - PMJAY was

launched in September 2018.19 It aims to provide

an insurance cover of Rs five lakh per family per

year to 10.7 crore poor families.19 The scheme

subsumed two centrally sponsored schemes,

namely, Rashtriya Swasthya Bima Yojana (RSBY)

and the Senior Citizen Health Insurance Scheme.

Benefits: The scheme provides insurance coverage

for secondary and tertiary healthcare. The scheme

provides 1,350 medical packages such as surgery,

cost of medicines, day care treatments, and

diagnostics. In addition, the scheme provides for

pre- and post-hospitalisation expenses.

Allocation: In 2021-22, PMJAY has been

allocated Rs 6,400 crore, which is double the actual

spend two years ago (Rs 3,200 crore in 2019-20).

A study report by the 15th Finance Commission on

Ayushman Bharat (2019) estimated the demand

and expenditure on PMJAY for the next five years.

It stated that the total costs (centre and states) of

PMJAY for 2019 could range from Rs 28,000 crore

to Rs 74,000 crore.20 This estimate considers: (i)

the assumption that all targeted beneficiaries will

be covered (approximately 50 crore people), (ii)

hospitalisation rates over time, and (iii) average

expenditure on hospitalisation. Further, it noted

that these costs could go up to between Rs 66,000 crore and Rs 1,60,089 crore in 2023 (accounting for

inflation).

Implementation: The Economic Survey 2020-21

notes that PMJAY enhanced health insurance

coverage. The proportion of health insured

households increased by 54% in states that

implemented PMJAY and decreased by 10% for

states which did not implement it. The infant

mortality rate also decreased by 20% in states with

implementation whereas in states without

implementation the mortality rate declined by 12%.

Table 7 shows details regarding the implementation

of the Ayushman Bharat programme which

includes PMJAY and Health and Wellness Centres.

Table 7: Status of implementation of Ayushman

Bharat - PMJAY (as of September 2020)

Indicators All India

Beneficiary families covered (in crore) 13.13

Funds disbursed to states/UTs for implementation (in crore)

5,474

Total hospital admissions authorised (in crore) over 1.24#

Health and Wellness Centres 59,307*

Note: #Includes 5.13 lakh hospital admissions for testing and

treatment of COVID-19; *As on February 10, 2021.

Sources: Press Information Bureau (September 23, 2020)

Ministry of Health and Family Welfare; Lok Sabha Unstarred

Question No. 2081, Ministry of Health and Family Welfare,

answered on September 23, 2020; HWC Portal, Ayushman

Bharat; PRS.

Note that, the Standing Committee on Health

(2018) and a study report of the 15th Finance

Commission (2019) had noted that PMJAY is just

an extension of RSBY which provided for coverage

of up to Rs 30,000 per family per annum.20,21

Hence, to ensure proper implementation of the

scheme, an analysis of the failures and

inadequacies of RSBY should be done. This would look at whether: (i) RSBY covered all potential

beneficiaries, (ii) hospitalisation rates increased

under the scheme, and (iii) insurance companies

were profitable under the scheme. The key

challenges identified in the implementation of

RSBY include: (i) low rate of enrolment of

beneficiaries, (ii) increase in out-of-pocket

expenditure, and (iii) issues in empanelment of

healthcare service providers.22

The Standing Committee on Health and Family

Welfare (2020) noted that PMJAY faces various implementation challenges. These challenges

include issues in: (i) identification of beneficiaries,

(ii) non-inclusion of numerous eligible people, (iii)

empanelment of healthcare providers, and (iv)

hospital transaction system.23

Out-of-pocket expenditure: While PMJAY

provides coverage for secondary and tertiary levels

of healthcare, most of the out-of-pocket

expenditure made by the consumers is on

pharmacies (47%), private general hospitals (31%),

government general hospitals (8%), medical and diagnostics (7%), and towards patient transport and

emergency rescue (7%) (See Figure 3).24


- 102 -

Figure 3: Major heads for which out-of-pocket

expenditure is made (May 2020)

Sources: NITI Aayog (May 1, 2020); PRS.

Out-of-pocket expenditure is the payment made

directly by individuals at the point of service where

the entire cost of the health service is not covered

under any financial protection scheme.

The Economic Survey 2020-21 observes that the

overall out-of-pocket expenses in India on

healthcare are 60% of the total expense on public

health (which is one of the highest in the world).

The survey highlights that increasing the spending

on public health from 1% of the GDP to 2.5-3% of

GDP will help in reducing the out-of-pocket

expenses from 60% to 30%.4

Pradhan Mantri Swasthya Suraksha Yojana

Pradhan Mantri Swasthya Suraksha Yojana

(PMSSY) was introduced in 2003 with objective

of: (i) correcting regional imbalances in the

availability of affordable and reliable tertiary

healthcare services, and (ii) augmenting facilities

for quality medical education in the country. This

includes establishing AIIMS like institutions and

upgrading certain state government hospitals. Over the years, the scheme has been expanded to cover

20 new AIIMS and 71 state government hospitals.

In 2018, the Comptroller and Auditor General

(CAG) noted that all new AIIMs overshot their

completion time by almost five years.25 There were

similar delays observed in the upgradation of state

government hospitals. Further, it was found that

the Ministry had estimated the capital cost for

setting up six new AIIMS in Phase 1 to be Rs 332

crore per institute. After four years, this cost was

revised to Rs 820 crore per institute, on account of

shortcomings in planning and assessment of requirements. The Standing Committee on Health

and Family Welfare (2017 and 2018) noted that this

indicates poor assessment of time and cost which

have left the allocated funds unused.21,26

Figure 4: Yearly allocation to PMSSY (2010-22)

(in Rs crore)

Notes: Values for 2020-21 and 2021-22 are revised estimate

and budget estimate respectively


In 2021-22, the allocation to PMSSY has been

decreased by 7% over the revised estimates of

2020-21 at Rs 7,000 crore. Allocation towards

PMSSY increased from Rs 654 crore in 2010-11 to

Rs 6,020 crore in 2020-21 (24% annual increase).

In 2020-21, the revised estimate for PMSSY (Rs

7,517 crore) was 25% higher than the budget

estimate (Rs 6,020 crore). This was due to the

capital allocation (Rs 2,448 crore) for PMSSY at

the revised stage.

Health research

In 2021-22, the Department of Health Research has

been allocated Rs 2,663 crore (20% annual increase

over 2019-20). The revised estimate in 2020-21 is

93% higher than the budget estimate for the year

(Rs 2,100 crore).


Welfare (March 2020) noted that the allocation to

Department of Health Research is low compared to

the requirement of funds needed for health

research. The Committee recommended that at

least 10% of the budget for the Ministry of Health

and Family Welfare should be allocated towards

health research.27


Welfare (November 2020) noted that the budgetary

allocation of Department of Health Research has

been one of the lowest in 2019-20 (Rs 1,900 crore)

as compared to the budgetary allocation of other

departments involved in scientific research.28 The

Committee reiterated its recommendations to

increase the budgetary outcomes of the Department

of Health Research. The Committee noted that

shortfall of funds may adversely impact the

establishment of new Viral Research & Diagnostic

Laboratories; Multi-Disciplinary Research Units in

Medical Colleges (MRUs), and Model Rural

Health Research Units (MRHRUs) in states.28

Further, the Committee noted that there is

inadequate investment on public health research, as

India invests only 0.65% of GDP on overall

research and development activities in the country

across various sectors. The Committee

Pharmacies47%

Private general

hospitals31%

Government general

hospitals8%

Medical and diagnostics

7%

Patient transport and emergency rescue

7%

-

2,000

4,000

6,000

8,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22


- 103 -

recommends that the Ministry of Health and

Family Welfare should at least increase its

spending on health research to the world average of

1.72% of GDP within two years.28


Welfare (2018) had noted the huge, persistent, and

recurring mismatch between the projected demand

for funds and actual allocation to the Department of

Health Research.29,30 The Committee also noted

that the Department had reported shortfall of funds

for implementation of projects and on the other

hand, there was underutilisation of funds released.

This mismatch between demand and allocation has

led to impact in terms of restrictions in the sanctioning of new labs, providing recurring grants

to the ongoing projects, and upgradation of health

research infrastructure.29 This also led to

repercussions in the medical research output. For

example, in two years i.e., 2015 and 2016, only

1,685 research papers have been published by the

Indian Council of Medical Research and three

patents have been granted against the 45 patents

filed.29

Regulation of healthcare sector

The Economic Survey 2020-21 noted that

information asymmetry is one of the key reasons which exposes the healthcare sector to market

failures. It noted that patients in India rarely know

the value of information they receive in the

healthcare sector. For example, in case of certain

medical services such as preventive care or mental

health, patients may never know about the quality

of the services they received. The Survey

recommends setting up a sectoral regulator

(specifically in private healthcare): (i) for

supervision and regulation of the healthcare sector,

and (ii) to prevent information asymmetry in the

sector. Further, the Survey noted that mitigating

information asymmetry in the healthcare sector will

help in achieving lower insurance premiums and

better welfare of people.

Drug regulation

In India, the import and manufacture of new drugs (including vaccines) is regulated under: (i) the

Drugs and Cosmetics Act, 1940, (ii) Drugs and

Cosmetics Rules, 1945, and (ii) New Drugs and

Clinical Trials Rules, 2019.31,32,33 The 1940 Act

provides for the regulation of import, manufacture,

sale, and distribution of drugs. Although the DCA

is a central legislation, it is implemented by the

states. The 2019 Rules provide for testing and

approval for new drugs (including vaccines) in

India.

The Mashelkar Committee Report (2003)

highlighted the following challenges of the drug regulatory system: (i) inadequacy of trained and

skilled personnel at the central and state levels, (ii)

lack of uniformity in the implementation of

regulatory requirements and variations in

regulatory enforcement, and (iii) inadequate or

weak drug control infrastructure at the state and

central level.34

Expert committees have recommended several

steps to address these concerns regarding drug

regulation in the country.34,35,36 They include: (i) a

new independent and professionally run regulatory

body, Central Drug Administration, reporting

directly to Ministry of Health and Family Welfare,

(ii) categorising the states in terms of scale of

industry (manufacturing and sale) and investment in their regulation accordingly, (iii) the revision and

imposition of higher fees for drug applications,

clinical trials, and registration of imported drugs

and foreign manufacturers, and (iv) establishment

of technical expert committees for new drug

approvals.

Currently, the Central Drugs and Standards Control

Organisation (CDSCO), which is headed by the

Drugs Controller General of India (DCGI),

regulates the approval of new drugs (including

vaccines) that are introduced in the country, grants permission to conduct clinical trials, and registers

and controls the quality of imported vaccines.33 It

also approves licenses for the manufacture of new

drugs (including vaccines) and coordinates these

activities with states across India.37

In 2015, the Ministry of Health and Family Welfare

constituted 25 panels of experts under the CDSCO

in various medical areas such as vaccine,

cardiology, and antiviral. These Subject Expert

Committees evaluate the application of clinical

trials, new drugs, and medical devices in their areas

of expertise.38 They are composed of 8 medical experts each. For example, the evaluation process

for emergency authorization of a COVID-19

vaccine is being conducted by the Subject Expert

Committee examining COVID-19 drugs and

vaccines.39

The National Medical Commission Act, 2019 (NMC Act)

Parliament passed the NMC Act in 2019 to replace the Medical Council of India (MCI). The NMC will oversee medical education and practice in India.

Functions of the NMC include: (i) framing policies for regulating medical institutions and medical professionals, (ii) assessing the requirements of healthcare related human resources and infrastructure, (iii) ensuring compliance by the State Medical Councils of the regulations made under the Act, (iv) framing guidelines for determination of fees for up to 50% of the seats in private medical institutions and deemed universities which are regulated under the Act.


- 104 -

Quality of drugs

The Standing Committee Report (2013) found that in India the prevalence of not-of-standard drugs is

7-8 % and the prevalence of spurious drugs is

0.5%.40

A not-of-standard drug refers to drug which do not

meet Indian pharmacopoeia standards. The

specifications under these standards include: (i)

name of pharmacopoeia, (ii) quality of bonding

agent, (ii) quality of colouring agent, and (iii)

dissolution time. A drug is deemed to be ‘spurious’

if: (i) it is manufactured under a name which

belongs to another drug, (ii) if it is an imitation of

another drug, or (iii) if it has been substituted wholly or partly by another drug, or (iv) if it

wrongly claims to be the product of another

manufacturer.41

The extent of 'non-standard quality' drugs in the

National Drug Survey between 2014 and 2016 was

3.2%.42 The extent of ‘spurious’ drugs during the

same period was 0.02%.42

With regard to quality of drugs, the Mashelkar

Committee recommended that: (i) states should

take more samples to check the quality of drugs

manufactured and sold in the market, (ii) states

should also monitor the source of purchase and

quality of drugs stocked by registered medical

practitioners, and (iii) number of drug inspectors

1 Economic Survey, 2015-16, Ministry of Finance,

http://indiabudget.nic.in/budget2016-2017/es2014-15/echapter-

vol1.pdf. 2 Economic Survey, 2016-17, Ministry of Finance,

http://indiabudget.nic.in/es2016-17/echapter.pdf. 3 Economic Survey, 2019-20, Ministry of Finance,


r/echap10_vol2.pdf. 4 Economic Survey, 2020-21, Ministry of Finance,

https://www.indiabudget.gov.in/economicsurvey/. 5 Demand Nos. 44 & 45, Ministry of Health and Family

Welfare, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/allsbe.pdf. 6 Press Statement by the Drugs Controller General of India

(DCGI) on Restricted Emergency approval of COVID-19 virus

vaccine, Press Information Bureau, Ministry of Health and

Family Welfare, January 3, 2020. 7 FDA Takes Key Action in Fight Against COVID-19 By

Issuing Emergency Use Authorization for First COVID-19

Vaccine, U.S. Food and Drug Administration, December 11,

2020, https://www.fda.gov/news-events/press-

announcements/fda-takes-key-action-fight-against-covid-19-

issuing-emergency-use-authorization-first-covid-19. 8 Report No. 229: Management of Covid-19 Pandemic and

Related Issues, Department-Related Parliamentary Standing

Committee

On Home Affairs, Rajya Sabha, December 21, 2020,


ReportFile/15/143/229_2020_12_18.pdf. 9 Unstarred Question No. 285, September 15, 2020, Ministry of

Health and Family Welfare, Rajya Sabha,

https://pqars.nic.in/annex/252/AU285.pdf 10 Report No. 124 - Action taken on 119th Report, Standing

Committee on Health and Family Welfare, November 2020,

and their skills must be upgraded according to the

load of work of inspections and monitoring.34

Drug pricing

The National Pharmaceutical Pricing Authority (NPPA) monitors the availability and pricing of

drugs in the country. NPPA fixes the prices of

drugs/devices included in Schedule I of Drugs

(Prices Control) Order (DPCO), 2013 after their

notification under National List of Essential

Medicines (NLEM). NLEM, 2015 consists of

3,754 medicines in total. Wherever instances of

manufacturers/ importers charging prices higher

than the prices fixed by the NPPA are reported,

these cases are examined in detail. Since the

inception of NPPA in 1995 till 2019, 2,038 demand

notices have been issued to pharmaceutical

companies for having overcharged patients on the

sale of formulations at prices above the ceiling

prices notified by NPPA.43 An amount of Rs 5,477

crore is still remaining to be paid and an amount of

Rs 4,033 crore is under litigation.43

In January 2019, the Standing Committee on

Affordable Medicines and Health Products

(SCAMHP) was constituted.44 The Committee acts

as a recommending body to NPPA regarding prices

of drugs and health products. In addition, the

Committee is authorised to examine a matter, suo-

moto or on request of NPPA or Department of

Health and Family Welfare.44


ReportFile/14/142/124_2020_11_18.pdf. 11 Frequently asked questions on COVID-19 vaccine, Ministry

of Health & Family Welfare, as accessed on January 25, 2021,

https://www.mohfw.gov.in/pdf/FAQsonCOVID19VaccineDece

mber2020.pdf. 12 27 crore prioritized age group and comorbid persons in the

sequential roll-out of vaccines after 3 crore healthcare and

frontline workers: Health Secretary, Press Information Bureau,

Ministry of Health & Family Welfare, January 12, 2021. 13 National Family Health Survey-5, Press Information Bureau,

Ministry of Health and Family Welfare, December 15, 2020. 14 Chapter VIII: Public Health Care System, Planning

Commission of India,

http://planningcommission.nic.in/aboutus/committee/strgrp/stgp

_fmlywel/sgfw_ch8.pdf. 15 Rural Health Statistics 2018, https://nrhm-

mis.nic.in/Pages/RHS2018.aspx?RootFolder=%2FRURAL%20

HEALTH%20STATISTICS%2F%28A%29%20RHS%20-

%202018&FolderCTID=0x01200057278FD1EC909F429B03E

86C7A7C3F31&View=%7B09DDD7F4-80D0-42E3-8969-

2307C0D97DDB%7D. 16 About HWC, Ayushman Bharat - Health and Wellness

Centres, Ministry of Health and Family Welfare, https://ab-

hwc.nhp.gov.in/#about. 17 A Report of High-Level Expert Group on Health Sector, 2019,


StudyReports/High%20Level%20group%20of%20Health%20S

ector.pdf. 18 Hospital beds (per 1,000 people), Work Bank Database, last

accessed on February 4, 2021,

https://data.worldbank.org/indicator/SH.MED.BEDS.ZS. 19 “Ayushman Bharat –Pradhan Mantri Jan AarogyaYojana

(AB-PMJAY) to be launched by Prime Minister Shri Narendra

http://indiabudget.nic.in/budget2016-2017/es2014-15/echapter-vol1.pdf

http://indiabudget.nic.in/budget2016-2017/es2014-15/echapter-vol1.pdf

http://indiabudget.nic.in/es2016-17/echapter.pdf





https://www.fda.gov/news-events/press-announcements/fda-takes-key-action-fight-against-covid-19-issuing-emergency-use-authorization-first-covid-19








https://www.mohfw.gov.in/pdf/FAQsonCOVID19VaccineDecember2020.pdf

https://www.mohfw.gov.in/pdf/FAQsonCOVID19VaccineDecember2020.pdf

http://planningcommission.nic.in/aboutus/committee/strgrp/stgp_fmlywel/sgfw_ch8.pdf

http://planningcommission.nic.in/aboutus/committee/strgrp/stgp_fmlywel/sgfw_ch8.pdf

https://nrhm-mis.nic.in/Pages/RHS2018.aspx?RootFolder=%2FRURAL%20HEALTH%20STATISTICS%2F%28A%29%20RHS%20-%202018&FolderCTID=0x01200057278FD1EC909F429B03E86C7A7C3F31&View=%7B09DDD7F4-80D0-42E3-8969-2307C0D97DDB%7D






https://ab-hwc.nhp.gov.in/#about

https://ab-hwc.nhp.gov.in/#about

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/StudyReports/High%20Level%20group%20of%20Health%20Sector.pdf



https://data.worldbank.org/indicator/SH.MED.BEDS.ZS


- 105 -

Modi in Ranchi, Jharkahnd on September 23, 2018”, Press

Information Bureau, Ministry of Health and Family Welfare,

September 22, 2018,

https://pib.gov.in/Pressreleaseshare.aspx?PRID=1546948. 20 ‘Ayushman Bharat: Costs and Finances of the Prime Minister

Jan Arogya Yojana’, Institute of Economic Growth, Study

Report for the 15th Finance Commission,


StudyReports/Ayushman%20Bharat%20Costs%20and%20Fina

nces.pdf. 21 “Report no. 106: Demands for Grants 2018-10 (Demand No.

42) of the Department of Health and Family Welfare”, Standing

Committee on Health and Family Welfare, March 8, 2018,


ReportFile/14/100/106_2019_7_10.pdf. 22 Report No. 112, Standing Committee on Health and Family

Welfare, December 28, 2018,


ReportFile/14/113/112_2019_7_16.pdf. 23 “Report No. 118: Demands for Grants 2020-21 (Demand No.




ReportFile/14/121/118_2020_3_15.pdf. 24 Household Health Expenditures in India (2013-14), December

2016, Ministry of Health and Family Welfare,

http://www.mohfw.nic.in/sites/default/files/3830041175148956

2625.pdf 25 Report No. 10, Performance Audit on Pradhan Mantri

Swasthya Suraksha Yojana, August 7, 2018,

https://cag.gov.in/content/report-no10-2018-performance-audit-

pradhan-mantri-swasthya-suraksha-yojana-ministry-health. 26 26 “Report no. 99: Demands for Grants 2017-18 (Demand No.




ommittee%20on%20Health%20and%20Family%20Welfare/99.

pdf 27 Report No. 119 – Demand for Grants of the Department of

Health Research, Standing Committee on Health and Family

Welfare, March 3, 2020,


ReportFile/14/121/119_2020_3_15.pdf. 28 Report No. 123: The Outbreak of Pandemic Covid-19 and its

Management, Department-Related Parliamentary Standing

Committee on Health and Family Welfare, Rajya Sabha,

November 21, 2020,


ReportFile/14/142/123_2020_11_15.pdf. 29 “Report no. 100: Demands for Grants 2017-18 (Demand

No.43) of the Department of Health Research”, Standing



ommittee%20on%20Health%20and%20Family%20Welfare/100

.pdf. 30 Report No. 107, Demand for Grants 2018-19 (Demand No.

43) of the Department of Health Research, Standing Committee

on Health and Family Welfare, March 2018,


ReportFile/14/100/107_2018_6_16.pdf, 31 The Drugs and Cosmetics Act, 1940, and the Drugs and

Cosmetics Rules, 1945, Ministry of Health and Family Welfare,

https://cdsco.gov.in/opencms/export/sites/CDSCO_WEB/Pdf-

documents/acts_rules/2016DrugsandCosmeticsAct1940Rules19

45.pdf. 32 Draft Regulatory Guidelines for Development of Vaccines

with Special Consideration for Covid-19 Vaccine, Ministry of

Health and Family Welfare,

https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO

.WEB/elements/download_file_division.jsp?num_id=NjUwMA

== 33 G.S.R. 227 (E): New Drugs and Clinical Trial Rules, 2019,

Ministry of Health and Family Welfare, March 19, 2019,

https://cdsco.gov.in/opencms/export/sites/CDSCO_WEB/Pdf-

documents/NewDrugs_CTRules_2019.pdf 34 Report of the Expert Committee on “A Comprehensive

Examination of Drug Regulatory Issues, including the problem

of Spurious Drugs”, Ministry of Health and Family Welfare,

November, 2003,

http://pharmaceuticals.gov.in/sites/default/files/MashelkarCom

mitteeReport.pdf. 35 “Report no.59: The Functioning of the Central Drugs

Standards Control Organisation (CDSCO)”, Standing

Committee on Health and Family Welfare, Ministry of Health

and Family Welfare, May 8, 2012,



pdf. 36 Report of the (late)Prof. Ranjit Roy Chaudhury Expert

Committee to “Formulate Policy and Guidelines for Approval of

New Drugs, Clinical Trials and Banning of Drugs”, July, 2013,

http://www.cdsco.nic.in/writereaddata/Report_of_Dr_Ranjit_Ro

y.pdf. 37 Functions of CDSCO, Central Drugs Standard Control

Organization, Ministry of Health & Family Welfare,

https://cdsco.gov.in/opencms/opencms/en/About-us/Functions/. 38 Order F. No. 12-01/14-DC (Pt. 20), Ministry of Health and

Family Welfare, January 5, 2015, https://www.iscr.org/wp-

content/uploads/2019/05/2015-01-05-DCGI-office-order-

regarding-Subject-Expert-Committee-functioning.pdf. 39 Recommendation of the SEC meeting to examine COVID-19

related proposal under accelerated approval process made in its

131st meeting, Central Drugs Standard Control Organization,

Ministry of Health & Family Welfare, December 17-18, 2020,

https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO

.WEB/elements/common_download.jsp?num_id_pk=MTI4Mw

== 40 “Report no.59: The Functioning of the Central Drugs

Standards Control Organisation (CDSCO)”, Standing

Committee on Health and Family Welfare, Ministry of Health

and Family Welfare, May 8, 2012,



pdf. 41 Drugs and Cosmetics Act 2008, Ministry of Health and

Family Welfare, December 5, 2008,

http://www.cdsco.nic.in/writereaddata/D&C_ACT_AMENDME

NT_2008_file.pdf 42 National Drug Survey 2014-16, Ministry of Health and

Family Welfare,

https://mohfw.gov.in/sites/default/files/Chapter10SurveyResluta

ndAnalysis.pdf. 43 Year-wise Summary of Overcharging as of June 2019,

National Pharmaceutical Pricing Authority, Department of

Pharmaceuticals, Ministry of Chemical and Fertilizers,

http://www.nppaindia.nic.in/en/utilities/overcharging-

status/year-2019/. 44 Constitution of Standing Committee on Affordable Medicines

and Health Products (SCAMHP), Ministry of Chemicals &

Fertilizers, January 21, 2019,

https://pharmaceuticals.gov.in/sites/default/files/Constitution%2

0of%20Standing%20Committee%20on%20Affordable%20Med

icines.pdf.

https://pib.gov.in/Pressreleaseshare.aspx?PRID=1546948

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/StudyReports/Ayushman%20Bharat%20Costs%20and%20Finances.pdf









http://www.mohfw.nic.in/sites/default/files/38300411751489562625.pdf

http://www.mohfw.nic.in/sites/default/files/38300411751489562625.pdf

https://cag.gov.in/content/report-no10-2018-performance-audit-pradhan-mantri-swasthya-suraksha-yojana-ministry-health

https://cag.gov.in/content/report-no10-2018-performance-audit-pradhan-mantri-swasthya-suraksha-yojana-ministry-health

http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Health%20and%20Family%20Welfare/99.pdf












https://cdsco.gov.in/opencms/export/sites/CDSCO_WEB/Pdf-documents/acts_rules/2016DrugsandCosmeticsAct1940Rules1945.pdf



https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/download_file_division.jsp?num_id=NjUwMA==



https://cdsco.gov.in/opencms/export/sites/CDSCO_WEB/Pdf-documents/NewDrugs_CTRules_2019.pdf

https://cdsco.gov.in/opencms/export/sites/CDSCO_WEB/Pdf-documents/NewDrugs_CTRules_2019.pdf

http://pharmaceuticals.gov.in/sites/default/files/MashelkarCommitteeReport.pdf

http://pharmaceuticals.gov.in/sites/default/files/MashelkarCommitteeReport.pdf




http://www.cdsco.nic.in/writereaddata/Report_of_Dr_Ranjit_Roy.pdf

http://www.cdsco.nic.in/writereaddata/Report_of_Dr_Ranjit_Roy.pdf

https://cdsco.gov.in/opencms/opencms/en/About-us/Functions/

https://www.iscr.org/wp-content/uploads/2019/05/2015-01-05-DCGI-office-order-regarding-Subject-Expert-Committee-functioning.pdf



https://cdsco.gov.in/opencms/opencms/system/modules/CDSCO.WEB/elements/common_download.jsp?num_id_pk=MTI4Mw==






http://www.cdsco.nic.in/writereaddata/D&C_ACT_AMENDMENT_2008_file.pdf

http://www.cdsco.nic.in/writereaddata/D&C_ACT_AMENDMENT_2008_file.pdf

https://mohfw.gov.in/sites/default/files/Chapter10SurveyReslutandAnalysis.pdf

https://mohfw.gov.in/sites/default/files/Chapter10SurveyReslutandAnalysis.pdf

http://www.nppaindia.nic.in/en/utilities/overcharging-status/year-2019/

http://www.nppaindia.nic.in/en/utilities/overcharging-status/year-2019/

https://pharmaceuticals.gov.in/sites/default/files/Constitution%20of%20Standing%20Committee%20on%20Affordable%20Medicines.pdf




- 106 -

Annexure

Table 8: Allocations to the Ministry of Health and Family Welfare for 2021-22 (in Rs crore)


2020-21 BE

2020-21 RE

2021-22 BE

Annualised Change from 2019-20 Actuals

to 2021-22 BE

Department of Health and Family Welfare 62,397 65,012 78,866 71,269 7%

Department of Health Research 1,861 2,100 4,062 2,663 20%

Pradhan Mantri Swasthya Suraksha Yojana (PMSSY)

4,683 6,020 7,517 7,000 22%

Family Welfare Schemes 489 600 496 387 -11%

National AIDS and STD Control Programme 2,813 2,900 2,900 2,900 2%

National Health Mission 34,660 33,400 35,144 36,576 3%

-National Rural Health Mission 29,987 27,039 28,367 30,100 0.2%

-National Urban Health Mission 850 950 950 1,000 8%

-Tertiary Care Programs 241 550 312 501 44%

-Strengthening of State Drug Regulatory System

206 175 130 175 -8%

-Human Resources for Health and Medical Education

3,376 4,686 5,386 4,800 19%

Infrastructure Development for Health Research

148 170 169 177 9%

Rashtriya Swasthya Bima Yojna (RSBY) 57 29 29 1 -87%

Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (PMJAY)

3,200 6,400 3,100 6,400 41%

Autonomous Bodies 9,601 9,616 9,882 10,924 7%

Others 8,607 7,976 9,474 9,567 5%

COVID-19 Emergency Response and Health System Preparedness Package

- - 13,857 -

COVID-19 vaccination for healthcare workers and frontline workers

- - 360 -

Total 64,258 67,112 82,928 73,932 7%

Sources: Demand for Grants, Ministry of Health and Family Welfare, Union Budget, 2021-22; PRS.


- 107 -

State-wise numbers on the health sector

Table 9: Comparison of key health indicators across states

State

Population (Million)

2011

Crude Birth Rate

2017

Total Fertility

Rate, 2018

Under 5 mortality

rate, 2010-15

Infant Mortality Rate (per 1000 live

Births) 2018

Underweight children (%)

2015-16

Life Expectancy

at Birth (Years) 2014-18

Maternal Mortality

Ratio 2016-18

No. of live births per 1,000 in a population.

No. of children born to a woman in

her lifetime

Death between

0-5 years, per 1,000 live births

No. of infants who die before

reaching one, per 1,000 live

births

% Children below 5 years

of age who are

underweight

How long a new-born

can expect to live, on existing

death rate

No. of maternal deaths,

per 1,00,000 live births

Andhra Pradesh 49 16 1.6 41 29 32% 70 65

Assam 31 21 2.2 57 41 30% 67 215

Bihar 104 26 3.2 58 32 44% 69 149

Chhattisgarh 26 23 2.4 64 41 38% 65 159

Gujarat 60 20 2.1 44 28 39% 70 75

Haryana 25 21 2.2 41 30 29% 70 91

Jharkhand 33 23 2.5 54 30 48% 69 71

Karnataka 61 17 1.7 32 23 35% 69 92

Kerala 33 14 1.7 7 7 16% 75 43

Madhya Pradesh 73 25 2.7 65 48 43% 67 173

Maharashtra 112 16 1.7 29 19 36% 73 46

Odisha 42 18 1.9 48 40 34% 69 150

Punjab 28 15 1.6 33 20 22% 73 129

Rajasthan 69 24 2.5 51 37 37% 69 164

Tamil Nadu 72 15 1.6 27 15 19% 72 60

Telangana 35 17 1.6 32 27 29% 70 63

Uttar Pradesh 200 26 2.9 78 43 40% 65 197

West Bengal 91 15 1.5 32 22 32% 72 98

Arunachal Pradesh 1 18 33 37 19%

Delhi 17 15 1.5 42 13 27% 74

Goa 1 13 13 7 24%

Himachal Pradesh 7 16 1.6 38 19 21% 73

Jammu & Kashmir 13 15 1.6 38 22 17% 74

Manipur 3 15 26 11 14%

Meghalaya 3 23 40 33 29%

Mizoram 1 15 46 5 12%

Nagaland 2 14 37 4 17%

Sikkim 1 16 32 7 14%

Tripura 4 13 33 27 24%

Uttarakhand 10 17 1.8 47 31 27% 71 99

Andaman & Nicobar Islands

0 11 13 9 22%

Chandigarh 1 14 38 13 25%

Dadra & Nagar Haveli

0 24 42 13 39%

Daman & Diu 0 20 34 16 27%

Lakshadweep 0 15 30 14 23%

Puducherry 1 13 16 11 22%

All India 1,211 20 2.2 50 32 36% 69 113 Sources: Census Data 2011; Sample Registration System 2019; Health and Family Welfare Statistics 2017; Special Bulletin on maternal

Mortality in India 2016-18; National Family Health Survey-4 (2015-16); PRS.

- 108 -

Demand for Grants: Jal Shakti

The Ministry of Jal Shakti is responsible for the

development, maintenance, and efficient use of

water resources in the country and coordination of

drinking water and sanitation programs in rural

areas. The Ministry was created in 2019 by

integrating the Ministries of: (i) Water Resources,

River Development, and Ganga Rejuvenation, and

(ii) Drinking Water and Sanitation.

In this note we discuss the overview of finances of

the Department of Drinking Water and Sanitation,

and the Department of Water Resources separately,

and then discuss broader issues in the sectors.

Allocations in Union Budget 2021-22

In 2021-22, the Ministry of Jal Shakti received an

allocation of Rs 69,053 crore which is a 64%

annual increase over the actual expenditure in

2019-20. The focus of the increased expenditure is

on drinking water, which is line with the

government’s agenda to provide functional tap water connections to all households by 2024.1

Further, the Economic Survey (2020-21) noted that

a strong emphasis on sanitation and drinking water

is required to prevent communicable diseases.2

Table 1 provides details on allocations to the two

departments under the Ministry.

Table 1: Budgetary allocation to the Ministry of

Jal Shakti (in Rs crore)

Department Actuals (19-20)

Revised (20-21)

Budgeted (21-22)

Annualised Change

(Actuals 19-20 to BE 21-22)

Drinking Water and Sanitation

18,264 17,024 60,030 81%

Water Resources 7,419 7,262 9,023 10%

Total 25,683 24,286 69,053 64%

Note: BE is budget estimate.

Sources: Demands for Grants 2021-22, Ministry of Jal Shakti;

PRS.

Policy proposals in Union Budget 2021-22

▪ The Jal Jeevan Mission (Urban) will be launched to enable

universal water supply and liquid waste management in

urban areas.

▪ The Urban Swachh Bharat Mission 2.0 will be implemented.

It will focus on sludge and waste water management.


Department of Drinking Water and

Sanitation

The Department of Drinking Water and

Sanitation administers programs for safe drinking

water and sanitation in rural areas. It is responsible

for the two programs: the Jal Jeevan Mission with

an aim to provide functional household tap

connection to every rural household, and the

Swachh Bharat Mission-Gramin for sanitation.3

The Department has an allocation of Rs 60,030

crore, accounting for 87% of the Ministry’s

allocation. This is an 81% annual increase

compared to the actual expenditure in 2019-20.

Over the past 10 years, the expenditure by the

Department increased at an average annual growth

rate of 3% (excluding 2021-22). Table 2 below

shows the trends in expenditure by the Department

in the last decade. The allocation for the

Department increased by 253% in 2021-22 (over

the revised estimates for 2020-21).

Table 2: Expenditure by the Department of

Drinking Water and Sanitation

Year Expenditure (in Rs crore)

% Change in expenditure

2012-13 12,968 29.7%

2013-14 11,941 -7.9%

2014-15 12,091 1.3%

2015-16 11,081 -8.4%

2016-17 16,476 48.7%

2017-18 23,939 45.3%

2018-19 18,412 -23.1%

2019-20 18,264 -0.8%

2020-21 17,024 -7%

2021-22 60,030 253%

Note: Values for 2020-21 are revised estimates and 2021-22 are

budget estimates. Allocations before 2019-20 were towards the

erstwhile Ministry of Drinking Water and Sanitation.


As can be seen in Figure 1, from 2011-12 to 2014-

15, the Department’s expenditure was focused on

drinking water. With the introduction of the

Swachh Bharat Mission, between 2015-19, the

focus of expenditure was on rural sanitation.

However, since 2019-20 the expenditure focus has

shifted back towards drinking water.

Demand for Grants 2021-22 Analysis: Jal Shakti PRS Legislative Research

- 109 -

Figure 1: Expenditure on drinking water and

sanitation (as a % of Department’s expenditure)


budget estimates.


Between 2011-15, the actual expenditure by the

Department of Drinking Water and Sanitation was

lower than the budgeted expenditure. However,

during 2015-18, the Department spent more than

the allocated amount. The actual expenditure in

2015-16 was 77% higher than the budgeted expenditure for the year. This may be due to the

lack of adequate budgeting and planning in the

implementation of the scheme.

Figure 2: % change between actual and

budgeted expenditure

Note: The expenditure figure for 2020-21 is revised estimate.


Schemes under the Department of Drinking

Water and Sanitation

Expenditure by the Department of Drinking Water

and Sanitation is primarily towards the two major

schemes, the Jal Jeevan Mission (JJM) and the

Swachh Bharat Mission-Gramin (SBM-G). Table

3 provides details on allocation towards these

schemes over the past three years.

Table 3: Budgetary allocation to the Department

of Drinking Water and Sanitation (in Rs crore)

Major head Actuals (19-20)

Revised (20-21)

Budgeted (21-22)

Annualised Change (Actuals 19-20 to

BE 21-22)

JJM 10,030 11,000 50,011 123%

SBM-G 8,213 6,000 9,994 10%

Others 21 24 25 10%

Total 18,264 17,024 60,030 81%

Note: BE is budget estimate.

Sources: Demands for Grants 2021-22, Department of Drinking

Water and Sanitation; PRS.

JJM has been allocated Rs 50,011 crore in 2021-22

(123% annual increase over 2019-20). This

increase may be owing to the government’s aim to

provide functional tap water connections to all

households by 2024.1 SBM-G has been allocated

Rs 9,994 crore in 2020-21 (10% annual increase

over 2019-20).

The 15th Finance Commission noted that the

COVID-19 pandemic has highlighted the

importance of drinking water and sanitation.14 It

recommended greater emphasis on availability of

safe drinking water and sanitation services to

protect human health during infectious disease

outbreaks.14 Further, it recommended that 60% (Rs

1,42,084 crore) of the total grants for rural local

bodies be spent on these sectors during 2021-26.14

Swachh Bharat Mission - Gramin

In 2014, the Swachh Bharat Mission (Gramin) was

launched by restructuring the Nirmal Bharat

Abhiyan.4 The Mission aimed to achieve universal

sanitation coverage, improve cleanliness, and

eliminate open defecation by October, 2019.5

The expenditure towards rural sanitation schemes

saw a steady increase from 2011-12 (Rs 1,500

crore) to 2017-18 (Rs 16,888 crore), and a decrease

in the subsequent years. Table 4 shows the trends

in budget allocation and actual expenditure on rural

sanitation in the past 10 years.

Table 4: Budgeted versus actual expenditure on sanitation (in Rs crore)


2011-12 1,650 1,500 91%

2012-13 3,500 2,474 71%

2013-14 3,834 2,244 59%

2014-15 4,260 2,841 67%

2015-16 3,625 6,703 185%

2016-17 9,000 10,484 116%

2017-18 13,948 16,888 121%

2018-19 15,343 12,913 84%

2019-20 9,994 8,213 82%

2020-21 9,994 6,000 60% Note: The ‘actuals’ figure for 2020-21 is the revised estimate.


0%

20%

40%

60%

80%

100%20

11-1

2

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Drinking Water Rural Sanitation

-9% -7%-22%-21%

77%

18% 20%

-18%-9%

-21%-40%

-20%

0%

20%

40%

60%

80%

100%

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21


- 110 -

The increased spending from 2015-16 to 2017-18

was due to the focus on improving sanitation, after

the launch of SBM-G. Note that the allocation

towards the scheme has been the same since 2019-

20 (Rs 9,994 crore). Further, there has been under-

utilisation of the allocated amount since 2018-19.

Construction of Individual Household Latrines

(IHHLs): The cost for constructing a household

toilet was increased from Rs 10,000 to Rs 12,000 in

September 2014 when the Nirmal Bharat Abhiyan

was restructured into SBM-G.6 This cost for

constructing toilets is shared between the centre

and the state in the ratio of 60:40. Table 5 gives

the number of household toilets constructed since

the inception of the scheme.

Table 5: Toilets constructed since 2014-15

Year Toilets Constructed

2014-15 48,10,142

2015-16 1,23,98,184

2016-17 2,15,10,893

2017-18 2,92,57,956

2018-19 2,18,50,623

2019-20 1,77,02,842

Total 10,75,30,640

Sources: SBM Dashboard, Ministry of Jal Shakti; PRS.

As per the Department, 43.4% of the rural

households had access to toilets in 2014-15, which

has increased to 100% in February 2021.7 Figure 3

illustrates the total coverage of household toilets

since the inception of the SBM programme.

Figure 3: Percentage of households with toilets

(2014-2021)

Sources: Management Information System Reports of SBM,

Ministry of Jal Shakti; PRS.

The Economic Survey (2020-21) noted that

sanitation access improved for all states during

2012 to 2018.2 However, inter-state differences in

access to sanitation are still large, especially in

rural areas. For example, access to sanitation is below 75% in states such as Odisha, Jharkhand,

Uttar Pradesh, and West Bengal.2

Open Defecation Free (ODF) villages: Under

SBM-G, a village is declared as ODF when: (i)

there are no visible faeces in the village, and (ii)

every household as well as public institution uses

safe technology options for faecal disposal.8

After a village declares itself as ODF, state

governments are required to verify the ODF status

of such a village. Such verification must include

indicators such as access to a toilet facility and its

usage, and safe disposal of faecal matter through

septic tanks.

The guidelines for ODF state that since it is not a

one-time process, at least two verifications must be

carried out.9 The first verification must be carried

out within three months of ODF declaration. The

second verification must be carried out around six

months after the first verification.

As per the Ministry of Jal Shakti, a total of

6,03,142 villages across 711 districts and 35 states

and union territories have been declared as ODF as

of February 2021.10 Of these, 5,99,953 villages (99.5%) have been verified by state governments as

ODF under the first level of verification.10

1,79,945 villages (30%) have been verified as ODF

under the second level of verification.11 State-wise

details on the number of villages declared and

verified ODF are presented in the Annexure. The

15th Finance Commission recommended that an

independent survey be instituted to estimate the

prevalence of open defecation in the country.14

Further, the 15th Finance Commission noted that

the practice of open defecation is still prevalent, despite access to toilets and highlighted that there is

a need to sustain behavioural change of people for

using toilets.14 In March 2020, the Department

launched Phase II of SBM (G) which will focus on

ODF Plus and will be implemented from 2020-21

to 2024-25 with an outlay of Rs 1,40,881 crore.12,13

ODF Plus includes ODF sustainability and solid

and liquid waste management.14

The 15th Finance Commission also noted that the

scheme only provides financial incentives to

construct latrines to households below poverty line

(BPL) and selected households above poverty line.14 It highlighted that there are considerable

exclusion errors in finding BPL households and

recommended the universalisation of the scheme to

achieve 100% ODF status.14

Jal Jeevan Mission

The Jal Jeevan Mission was launched in 2019 with

the aim to provide functional household tap

connection to every rural household by 2024.1 It

subsumed the National Rural Drinking Water

Programme. The total estimated cost of JJM is Rs

3.6 lakh crore over 2019 to 2024.1

In 2021-22, it has been allocated Rs 50,011 crore,

which is a 123% annual increase over the actual

expenditure in 2019-20. After a reduction in

expenditure on the scheme from 2015-16 to 2018-

19, the expenditure on the scheme was increased

from 2019-20 onwards (Figure 4).

43.4%51.4%

65.4%84.3%

98.5% 100.0% 100.0%

0%

20%

40%

60%

80%

100%

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

Feb

-21


- 111 -

Figure 4: Expenditure on Drinking Water

schemes (in Rs crore)

Note: Value for 2020-21 is the revised estimate.


Target versus achievements: The coverage of the

National Rural Drinking Water Programme

(NRDWP) was monitored in terms of habitations

having provision of minimum 40 Litres Per Capita

Per Day (LPCD) of potable drinking water sources

at a reasonable distance. As of September 2019,

1% of rural households have been fully covered

under the scheme with 40 LPCD of water supply

and 16% households have been partially covered.14

JJM (which subsumed NRDWP) aims to provide

functional household tap connections to every

household. However, the coverage of piped-water-

supply remains low. As of September 2020, only

28.7% of rural households have functional piped-

water supply connections.15 Further, the 15th

Finance Commission noted that though the

Planning Commission had recommended

increasing drinking water supply levels in rural

areas from 40 LPCD to 55 LPCD, the Department

is yet to incorporate this target in JJM.14

The Standing Committee on Drinking Water and

Sanitation (2020-21) noted certain weaknesses in

the implementation of the scheme including: (i)

lack of participatory approach, (ii) inadequate

financial resources, (iii) non-availability of

technical human resources, and (iv) poor operation

and maintenance of completed schemes.16 It

recommended a speedy increase in the provision of

piped water supply and effective strategies to

monitor accomplished work.16

Department of Water Resources

The Department is responsible for: (i) planning and

coordination of water resources in the country, (ii)

monitoring of irrigation and flood control projects,

(iii) supporting state level activities for ground

water development, and (iv) reduction of pollution

and rejuvenation of rivers.17

In 2021-22, the Department has an allocation of Rs

9,023 crore, accounting for 13% of the Ministry’s

allocation. This is a 10% annual increase over the


Figure 5: Expenditure by the Department of

Water Resources over the years (Rs crore)

Note: Values for 2020-21 and 2021-22 are revised

estimates and budget estimates respectively.


Major schemes

In 2021-22, 62% of the Department’s expenditure

is estimated to be on the Pradhan Mantri Krishi

Sinchai Yojna. This is followed by the National

River Conservation Plan (10.5%), Water Resources

Management (8.1%), and Namami Gange (6.7%).

Table 6: Allocation to the Department

of Water Resources (in Rs crore)

Major Head Actuals (19-20)

Revised (20-21)

Budgeted (21-22)

Change (Annualised)

(Actuals 19-20 to

BE 21-22)

PM Krishi Sinchai Yojna

4,033 4,391 5,588 17.7%

National River Conservation

1,336 900 950 -15.7%

Water Resources Management

626 449 729 7.9%

Namami Gange 353 500 600 30.3%

Central Water Commission

391 361 389 -0.2%

Central Ground Water Board

236 235 238 0.4%

Others 444 427 528 9.0%

Total 7,419 7,262 9,023 10.3% Note: BE is budget estimate. Others include central sector

projects such as river basin management, and major irrigation

projects.

Sources: Demands for Grants 2021-22, Department of Water

Resources, River Development, and Ganga Rejuvenation; PRS.

Issues to consider

Irrigation

The Economic Survey (2016-17) highlighted that

52% of the total net sown area in India is

unirrigated and depends on rainfall for

cultivation.18 It noted that when rainfall is

significantly less than usual, the unirrigated areas

face higher adverse effects than the irrigated areas.

Therefore, it recommended that irrigation coverage

in the country needs to be increased.18

The Pradhan Mantri Krishi Sinchai Yojana

(PMKSY) was launched during 2015-16.19 The

0%

20%

40%

60%

80%

100%

0

5,000

10,000

15,000

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Expenditure (Rs crore)% of Department expenditure

-60%

-40%

-20%

0%

20%

40%

60%

0

5,000

10,000

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure



- 112 -

scheme seeks to: (i) expand coverage of irrigation,

(ii) improve water use efficiency on farms, and (iii)

introduce sustainable water conservation

practices.20 The Jal Shakti Ministry implements

certain components of the scheme, such as PMKSY

– Har Khet Ko Pani, Flood Management, and

Borders Area Programme.19 Other components of

the scheme (such as Per Drop More Crop and Watershed Management) are implemented by the

Ministry of Agriculture and Farmers’ Welfare and

the Ministry of Rural Development.

Figure 6 shows the expenditure on the scheme

from 2016-17 to 2021-22. The scheme has been

allocated Rs 5,588 crore in 2021-22. Its share in

the Department’s expenditure is estimated to

increase from 35% in 2016-17 to 62% in 2021-22.

Figure 6: Expenditure on PMKSY over the

years (in Rs crore)


Har Khet ko Pani: This scheme’s objectives

include: (i) creation of new water sources, (ii)

restoration and repair of traditional water bodies,

(iii) command area development, and (iv)

strengthening of distribution network from

irrigation sources to the farm.21,22

Some components of the scheme are:

Accelerated Irrigation Benefit Programme (AIBP):

Under this scheme, financial assistance is being

provided for faster completion of irrigation

projects. As of February 2021, 44 projects (42%)

out of the 106 projects selected under the scheme

have been completed.23 Further, 22 projects (20%)

projects are facing constraints such as land

acquisition, legal, and contractual issues.23

Command Area Development and Water

Management Programme: The objective of the

programme is to enhance utilisation of irrigation

potential created. This is achieved through

activities such as construction of field channels,

land levelling, and reclamation of waterlogged

area.24 As of February 2021, there are 88 projects

under the programme, of which only 18 (21%)

have achieved more than 50% physical progress.25

Flood Management

The National Water Policy (2012) noted that

climate change has deepened incidences of water

related disasters such as floods, increased erosion,

and increased frequency of droughts.26 The central

government supports states by providing financial assistance for undertaking flood management

works in critical areas through the Flood

Management and Border Areas Programme. From

2017-18 to 2019-20, central assistance of Rs 2,022

crore has been released under the scheme.27

Under flood management component of the

scheme, 14 projects of the 83 sanctioned projects

had been completed as of March 2020.28 Major

issues faced while implementing the scheme

include acquisition of land for the project, legal

problems, non-release of state share, and inadequate budget allocation.29 The Standing

Committee on Water Resources (2020-21) noted

the delay in completion of projects and

recommended that the Department resolve the

underlying factors for such delay.28

Conservation and Rejuvenation of rivers

The Ministry of Jal Shakti implements the Namami

Gange Mission with the objective of rejuvenation

of river Ganga and its tributaries through municipal

sewage and industrial effluents treatment, river

surface cleaning, and rural sanitation.30 As of

February 2021, 142 (43%) of the 334 projects

sanctioned under the Mission have been

completed.31

The scheme was launched in 2014 with a budget

outlay of Rs 20,000 crore for the period 2015-

2020.32 During the period 2015-16 to 2020-21, only Rs 4,016 crore (20%) has been spent on the

programme.32 In 2021-22, the scheme has been

allocated Rs 600 crore, which is 30% annual

increase over the actual expenditure in 2019-20.

Table 7 shows the trends in budget allocation and

actual expenditure on Namami Gange from 2015-

16. Note that the utilisation under the scheme has

remained less than 65% since the scheme started.

Table 7: Budgeted versus actual expenditure on

Namami Gange (in Rs crore)


2015-16 - 100 -

2016-17 - 1,675 -

2017-18 2,300 700 30%

2018-19 2,300 688 30%

2019-20 750 353 47%

2020-21 800 500 62% Note: The ‘actuals’ figure for 2020-21 is the revised estimate.


The Standing Committee on Water Resources

(2020-21) noted that the implementation of the

program does not match the targets.28 Some key

0%

20%

40%

60%

80%

0

2,000

4,000

6,000

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure on PMKSY

% of Department expenditure


- 113 -

bottlenecks affecting the implementation of

projects include: (i) delay in tendering process, (ii)

non-availability of land for sewage treatment plants

leading to delay in execution of projects, and (iii)

underutilisation of sewage treatment plants’

capacities due to inadequate house sewer

connections in cities, among others.33 Further, in

response to the Committee’s observations, the Ministry of Jal Shakti responded (February 2021)

that the COVID-19 pandemic and consequent

lockdown had slowed the progress of the projects

due to insufficient labor.34

Ground water depletion

Currently, 63% of the net annual ground water available (393 billion cubic meter) is being

utilised.35 However, note that ground water

development is not uniform across states in India.

It has exceeded 100% in some states such as Delhi

(120%), Haryana (137%), Rajasthan (140%), and

Punjab (166%).35 This implies that the annual

ground water utilisation in these states is higher

than the net annual ground water availability. The

status of ground water development ratio across

states is provided in the Annexure. Experts have

noted that India is fast moving towards a ground

water crisis and nearly 60% of all districts in the

country have issues related to either availability of

ground water, or quality of ground water, or both.36

The ground water management and regulation

scheme was launched in 2008 with the aim to

regulate and control the development of ground

water resources of the country.37 Further, the Atal

Bhujal Yojana was launched in April 2020 for

sustainable management of ground water resources

through a strong ground water database and

community participation in the sector.38

Figure 7 shows the trend in expenditure on ground water schemes and the Central Ground Water

Board over the past ten years. The expenditure on

ground water schemes has increased substantially

only in 2017-18 and 2021-22.

Figure 7: Expenditure on Ground Water

Management (in Rs crore)


budget estimates.


Over the years, ground water usage has increased

in areas where the resource was readily available

due to its near universal availability, dependability,

and low capital cost. Agriculture sector is the

major consumer of ground water resources with

about 89% of the total annual ground water

extraction being used for irrigation (remaining 11%

for domestic and industrial use).39 Government incentives such as credit for irrigation and subsidies

for electricity supply have further increased the

dependency of agriculture on ground water.40

NITI Aayog in its Composite Water Management

Index (2019) emphasised that agriculture policies

that limit MSPs and subsidies for water-intensive

crops (such as sugarcane, wheat, and rice) in

regions with declining water tables, can

significantly bring down water demand from the

agriculture sector.41 Further, providing better price

support for crops such as pulses and oilseeds

(which require less water) would incentivise the

production of these crops.42

The 15th Finance Commission noted that under the

Jal Jeevan Mission, 63% of rural habitations are

being provided piped water supply from ground

water sources.14 It highlighted that this will

become unsustainable, given the highly depleted

water table in the country.14

The Commission recommended the following to

reduce the dependence on ground water: (i) fixing

price on water on graded basis, where higher

consumption entails higher charges, (ii) greater

reliance on surface water for schemes such as Jal

Jeevan Mission, and (iii) incentivising creation of

rainwater harvesting structures (including stricter

implementation of laws) and reuse of greywater.14

Ground water contamination

Ground water contamination is the presence of

certain pollutants in ground water that are in excess

of the limits prescribed for drinking water.43 The

Central Ground Water Board (2018) noted that

concentration of contaminants such as fluoride,

arsenic, nitrate, and iron in ground water beyond

the permissible limits can lead to environmental

issues and health problems. Table 8 shows the

number of states and districts affected by select

geogenic contaminants as of 2020.

Table 8: States and districts affected by geogenic

contamination in ground water (2020)

Geogenic contaminants

Number of affected

states/UTs

Number of affected districts

Arsenic (> 0.01 mg/l) 21 152

Fluoride (> 1.5 mg/l) 23 370

Nitrate (> 45 mg/l) 23 423

Iron (> 1mg/l) 27 341

Source: Unstarred Question 1944, Lok Sabha, Ministry of Jal

Shakti, September 22, 2020; PRS.

-50%

0%

50%

100%

150%

200%

150

350

550

750

950

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure



- 114 -

Further, as of February 2020, 3% (51,952) of the

total habitations (17,24,423) in India were affected

by contamination of ground water.14

The 15th Finance Commission noted that the

number of quality-affected habitations may rise as

deeper drilling for drinking water sources may lead

to chemical contamination of ground water.14

The National Water Quality Sub-Mission was

launched in March 2017 to provide safe drinking

water to 27,544 arsenic/fluoride affected rural

1 Background on Jal Jeevan Mission, Ministry of Jal Shakti,

https://jalshakti-ddws.gov.in/sites/default/files/JJM_note.pdf. 2 “Healthcare takes centre stage, finally!”, Chapter 5, Volume I,

Economic Survey (2020-21), February 1, 2021,


r/echap05_vol1.pdf. 3 Annual Report 2017-18, Ministry of Drinking Water and

Sanitation, https://jalshakti-

ddws.gov.in/sites/default/files/Annual_Report_2017-

18_English.pdf. 4 Review of Sanitation Programme in Rural Areas, 8th Report,

Committee on Estimates 2014-15, Lok Sabha,


df. 5 About SBM, Swachh Bharat Mission-Gramin,

http://swachhbharatmission.gov.in/SBMCMS/about-us.htm. 6 Review of Sanitation Programme in Rural Areas, Committee

on Estimates 2014-15, Lok Sabha,


df. 7 Swachh Bharat Mission- Gramin, Ministry of Jal Shakti, last


http://sbm.gov.in/sbmdashboard/IHHL.aspx. 8 Open Defecation Free (ODF) Sustainability Guidelines,

Ministry of Drinking Water and Sanitation,

http://swachhbharatmission.gov.in/sbmcms/writereaddata/image

s/pdf/guidelines/Guidelines-ODF-sustainability.pdf. 9 Swachh Bharat Mission- Gramin Guidelines, Ministry of Jal

Shakti, last accessed on February 4, 2021, https://jalshakti-

ddws.gov.in/sites/default/files/SBM%28G%29_Guidelines.pdf 10 Swachh Bharat Mission- Gramin Dashboard, last accessed on

February 4, 2021, https://sbm.gov.in/sbmdashboard/ODF.aspx. 11 Status of Declared and Verified villages, Swachh Bharat

Mission- Gramin Dashboard, Ministry of Jal Shakti, last


https://sbm.gov.in/sbmReport/Report/Physical/SBM_VillageOD

FMarkStatus.aspx. 12 “Cabinet approves Swachh Bharat Mission (Grameen) Phase-

II”, Press Information Bureau, Cabinet, February 19, 2020. 13 ‘Shri Gajendra Singh Shekhawat launches Swachh Bharat

Mission (Grameen) Phase-II’, Press Information Bureau,

Ministry of Jal Shakti, March 4, 2020. 14 Finance Commission Report (2021-26), Volume III, February

1, 2021,

file:///C:/Users/Prs/Downloads/XVFC%20Complete_Report.pdf 15 Lok Sabha Unstarred Question No. 891, Department of

Drinking Water and Sanitation, Ministry of Jal Shakti, answered

on September 17, 2020,

http://164.100.24.220/loksabhaquestions/annex/174/AU891.pdf. 16 Standing Committee on Demand for Grants (2020-21),

Department of Drinking Water and Sanitation, Ministry of Jal

Shakti, March 5, 2020,

http://164.100.47.193/lsscommittee/Water%20Resources/17_W

ater_Resources_4.pdf. 17 Functions, Department of Water Resources, River

Development and Ganga Rejuvenation,

http://mowr.gov.in/about-us/functions.

habitations in the country, over a span of four

years.29

The Standing Committee on Drinking Water and

Sanitation (2019-20) observed that out of these

habitations, 11,884 habitations (43%) have been

covered under the scheme. 4,100 habitations (15%)

have seen an improvement in quality on retesting or

have been covered under a state plan.29

18 Climate, Climate Change and Agriculture, Economic Survey

2016-17,

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/082-

101_Chapter_06_ENGLISH_Vol_01_2017-18.pdf. 19 Lok Sabha Unstarred Question No.2045, Ministry of Jal

Shakti, July 4, 2019,


f. 20 Website, Pradhan Mantri Krishi Sinchayi Yojna, last accessed

on February 4, 2021, https://pmksy.gov.in/. 21 Demand no. 61, Department of Water Resources, River

Development and Ganga Rejuvenation, Union Budget 2020-21,

https://www.indiabudget.gov.in/doc/eb/sbe61.pdf. 22 “Implementation of PMKSY”, Press Information Bureau,

Ministry of Agriculture and Farmer Welfare, May 2016,

https://pib.gov.in/newsite/PrintRelease.aspx?relid=145004. 23 Dashboard, Pradhan Mantri Krishi Sinchayi Yojna –

Accelerated Irrigation Benefit Programme, Ministry of Jal

Shakti, last accessed on February 5, 2021, http://pmksy-

mowr.nic.in/aibp/. 24 Salient features, Pradhan Mantri Krishi Sinchayi Yojna,

Ministry of Jal Shakti, http://mowr.gov.in/programmes/salient-

features. 25 Dashboard, Common Area Development Programme,

Ministry of Jal Shakti, last accessed on February 5, 2021,

http://cadwm.gov.in/cadwm-dashboard/. 26 National Water Policy (2012), Ministry of Water Resources,

http://mowr.gov.in/sites/default/files/NWP2012Eng6495132651

_1.pdf. 27 Lok Sabha Unstarred Question No.2052, Ministry of Jal

Shakti, September 22, 2020,


f. 28 Standing Committee on Demand for Grant (2020-21),

Department of Water Resources, River Development and Ganga

Rejuvenation, March 5, 2020,


ater_Resources_3.pdf. 29 “Standing Committee on Water Resources (2019-20)”,

Ministry of Jal Shakti – Department of Drinking Water and

Sanitation, Demand for Grants (2019-20),


ater_Resources_2.pdf. 30 Lok Sabha Unstarred Question No.2837, Ministry of Jal

Shakti, December 5, 2019,


f. 31 Targets and Achievements, National Mission for Clean

Ganga, last accessed on February 4, 2021,

http://35.154.100.225/nmcg/nmcgpmtmain.aspx. 32 Sustainable development and climate change, Volume 2,

Economic Survey 2018-19.


r/echap05_vol2.pdf. 33 “20th Standing Committee on Water Resources (2017-18)”,

Ministry of Water Resources, River Development and Ganga

Rejuvenation, Demand for Grants (2018-19),

https://jalshakti-ddws.gov.in/sites/default/files/JJM_note.pdf



https://jalshakti-ddws.gov.in/sites/default/files/Annual_Report_2017-18_English.pdf





http://swachhbharatmission.gov.in/SBMCMS/about-us.htm



http://sbm.gov.in/sbmdashboard/IHHL.aspx

http://swachhbharatmission.gov.in/sbmcms/writereaddata/images/pdf/guidelines/Guidelines-ODF-sustainability.pdf

http://swachhbharatmission.gov.in/sbmcms/writereaddata/images/pdf/guidelines/Guidelines-ODF-sustainability.pdf

https://jalshakti-ddws.gov.in/sites/default/files/SBM%28G%29_Guidelines.pdf

https://jalshakti-ddws.gov.in/sites/default/files/SBM%28G%29_Guidelines.pdf

https://sbm.gov.in/sbmdashboard/ODF.aspx

https://sbm.gov.in/sbmReport/Report/Physical/SBM_VillageODFMarkStatus.aspx

https://sbm.gov.in/sbmReport/Report/Physical/SBM_VillageODFMarkStatus.aspx


http://164.100.47.193/lsscommittee/Water%20Resources/17_Water_Resources_4.pdf


http://mowr.gov.in/about-us/functions

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/082-101_Chapter_06_ENGLISH_Vol_01_2017-18.pdf

https://mofapp.nic.in/economicsurvey/economicsurvey/pdf/082-101_Chapter_06_ENGLISH_Vol_01_2017-18.pdf



https://pmksy.gov.in/


https://pib.gov.in/newsite/PrintRelease.aspx?relid=145004

http://pmksy-mowr.nic.in/aibp/

http://pmksy-mowr.nic.in/aibp/

http://mowr.gov.in/programmes/salient-features

http://mowr.gov.in/programmes/salient-features

http://cadwm.gov.in/cadwm-dashboard/

http://mowr.gov.in/sites/default/files/NWP2012Eng6495132651_1.pdf

http://mowr.gov.in/sites/default/files/NWP2012Eng6495132651_1.pdf









http://35.154.100.225/nmcg/nmcgpmtmain.aspx




- 115 -


ater_Resources_20.pdf. 34 “Action Taken by the Government on the Observations /

Recommendations contained in the Third Report on Demands

for Grants (2020-21)”, Ministry of Water Resources, River

Development and Ganga Rejuvenation, February 9, 2021,


ater_Resources_8.pdf. 35 Water and Related Statistics, October 2019, Central Water

Commission,

http://www.indiaenvironmentportal.org.in/files/file/water-and-

related-statistics-2019.pdf. 36 12th Five Year Plan, Planning Commission, 2013

http://planningcommission.gov.in/plans/planrel/fiveyr/12th/pdf/

12fyp_vol1.pdf. 37 Lok Sabha Unstarred Question No.737, Ministry of Jal Shakti,

November 21, 2019,

http://164.100.24.220/loksabhaquestions/annex/172/AU737.pdf. 38 Lok Sabha Unstarred Question No. 1914, Ministry of Jal

Shakti, answered on September 22, 2020,


f.

39 Ground water year book, 2018-19,

https://indiawris.gov.in/downloads/GW%20Year%20Book_201

8-19_JAN%208.pdf 40 Report of the Export Group on Ground Water Management

and Ownership, Planning Commission, September 2007,

http://planningcommission.nic.in/reports/genrep/rep_grndwat.pd

f. 41 Composite Water Management Index 2019, NITI Aayog,

August 2019, https://niti.gov.in/sites/default/files/2019-

08/CWMI-2.0-latest.pdf. 42 Report of the High-Level Committee on Reorienting the Role

and Restructuring of Food Corporation of India, January 2015,

http://www.fci.gov.in/app/webroot/upload/News/Report%20of%

20the%20High%20Level%20Committee%20on%20Reorienting

%20the%20Role%20and%20Restructuring%20of%20FCI_Engl

ish_1.pdf. 43 Lok Sabha Unstarred Question No. 2157, Ministry of Water

Resource, River Development and Ganga Rejuvenation,

answered on March 10, 2015,

http://164.100.47.132/LssNew/psearch/QResult16.aspx?qref=14

305. .





http://www.indiaenvironmentportal.org.in/files/file/water-and-related-statistics-2019.pdf

http://www.indiaenvironmentportal.org.in/files/file/water-and-related-statistics-2019.pdf

http://planningcommission.gov.in/plans/planrel/fiveyr/12th/pdf/12fyp_vol1.pdf

http://planningcommission.gov.in/plans/planrel/fiveyr/12th/pdf/12fyp_vol1.pdf




https://indiawris.gov.in/downloads/GW%20Year%20Book_2018-19_JAN%208.pdf

https://indiawris.gov.in/downloads/GW%20Year%20Book_2018-19_JAN%208.pdf

http://planningcommission.nic.in/reports/genrep/rep_grndwat.pdf

http://planningcommission.nic.in/reports/genrep/rep_grndwat.pdf

https://niti.gov.in/sites/default/files/2019-08/CWMI-2.0-latest.pdf

https://niti.gov.in/sites/default/files/2019-08/CWMI-2.0-latest.pdf

http://www.fci.gov.in/app/webroot/upload/News/Report%20of%20the%20High%20Level%20Committee%20on%20Reorienting%20the%20Role%20and%20Restructuring%20of%20FCI_English_1.pdf







- 116 -

Annexure

Table 9: State-wise ODF declared and verified villages (as of 2020)

State Total Villages Total declared Total Verified Total Verified

(2nd level)

% Verified 2nd level

Andaman and Nicobar Islands 192 192 192 192 100%

Andhra Pradesh 18,841 18,841 18,841 18,819 100%

Arunachal Pradesh 5,389 5,389 5,389 5,389 100%

Assam 25,503 25,503 25,503 15,245 60%

Bihar 38,691 38,691 37,317 - -

Chandigarh 13 13 13 - -

Chhattisgarh 18,769 18,769 18,769 18,769 100%

Dadar and Nagar Haveli and Daman and Diu

95 95 95 95 100%

Goa 365 365 18 - -

Gujarat 18,261 18,261 18,261 18,261 100%

Haryana 6,908 6,908 6,908 6,908 100%

Himachal Pradesh 15,921 15,921 15,921 10,326 65%

Jammu and Kashmir 7,263 7,263 7,195 - -

Jharkhand 29,564 29,564 29,333 164 1%

Karnataka 27,044 27,044 26,900 - -

Kerala 2,027 2,027 2,027 2,027 100%

Ladakh 302 302 302 5 2%

Lakshadweep 9 9 9 - -

Madhya Pradesh 50,228 50,228 50,228 3 0%

Maharashtra 40,533 40,511 40,505 - -

Manipur 2,556 2,556 2,556 - -

Meghalaya 6,028 6,028 6,028 2,101 35%

Mizoram 696 696 696 537 77%

Nagaland 1,451 1,451 1,142 - -

Odisha 46,785 46,785 46,785 - -

Puducherry 265 265 265 265 100%

Punjab 13,726 13,726 13,700 13,700 100%

Rajasthan 42,860 42,860 42,860 - -

Sikkim 403 403 403 382 95%

Tamil Nadu 12,525 12,524 12,524 - -

Telangana 14,200 14,200 14,149 6,822 48%

Tripura 1,178 1,178 646 142 12%

Uttar Pradesh 97,640 97,640 97,623 23,213 24%

Uttarakhand 15,473 15,473 15,473 14,340 93%

West Bengal 41,461 41,461 41,377 22,362 54%

Total 6,03,165 6,03,142 5,99,953 1,79,945 30%

Sources: Management Information System Reports of SBM; PRS.


- 117 -

Table 10: Status of level of ground water development across states (2017)

State Ground water development (%)

Andhra Pradesh 44

Arunachal Pradesh 0

Assam 11

Bihar 46

Chhattisgarh 44

Delhi 120

Goa 34

Gujarat 64

Haryana 137

Himachal Pradesh 86

Jammu & Kashmir 29

Jharkhand 28

Karnataka 70

Kerala 51

Madhya Pradesh 55

Maharashtra 55

Manipur 1

Meghalaya 2

Mizoram 4

Nagaland 1

Odisha 42

Puducherry 74

Punjab 166

Rajasthan 140

Sikkim 0

Tamil Nadu 81

Telangana 65

Tripura 8

Uttar Pradesh 70

Uttarakhand 57

West Bengal 45

Total 63

Note: Total includes union territories; Data as of 2017.

Sources: Dynamic Ground Water Resources of India, 2017, Central Ground Water Board; PRS

- 118 -

Demand for Grants: Telecommunications

Department of Telecommunications under the

Ministry of Communications is responsible for

policy, licensing, monitoring, regulation, research

and international co-operation in the field of

telecommunications. The Department administers

several Public Sector Undertakings involved in

providing telecommunication services,

consultancy, and equipment manufacturing. This note presents the allocation to the Department in

2021-22, and trends in expenditure over the last

few years and discusses some of the issues in the

sector.


Expenditure1,2

In 2021-22, the Department has been allocated Rs

58,737 crore, which is a 44% annual increase over

the actual expenditure in 2019-20. One of the key

reasons for the increase in the allocation to the

Department is the revival plan for BSNL and

MTNL that was approved by the Union Cabinet in

October 2019.3

The revival plan provides for: (i) capital infusion

for allotment of 4G spectrum and (ii) costs to be

incurred towards voluntary retirement scheme.

Consequently, allocation to the department saw a

significant increase at the budget stage in 2020-21. However, at the revised stage, the allocation

towards a majority of the components of the revival

plan has been cut and instead shifted in the budget

for 2021-22. This is the key reason for: (i) the 44%

annual increase in allocation for 2021-22 as

compared to 2019-20, and (ii) the 38% decrease in

allocation in 2020-21 from the budget to the

revised stage.

Table 1: Allocation to the Department of

Telecommunications (in Rs crore) 2019-

20 2020-

21 BE

2020-21 RE

2021-22 BE

CAGR (19-20 to

21-22)

Revenue 23,466 40,757 36,749 32,803 18%

Capital 4,929 25,675 4,360 25,934 129%

Total 28,395 66,432 41,109 58,737 44% Note: RE: Revised Estimates; BE: Budget Estimates.

Sources: Expenditure Budget; Union Budget 2021-22; PRS.

The capital component of the revival plan

comprises capital infusion worth Rs 20,410 crore

for 4G spectrum. No allocation has been made

towards this in 2020-21 at the revised stage.

Instead, the same amount has been allocated in

2021-22 at the budget stage. As a result, there is a

substantial decrease in the allocation towards

capital expenditure in 2020-21 at the revised stage

and a significant increase in 2021-22.

Table 2: Allocation towards Revival Plan for

BSNL and MTNL (Rs crore)

Particular 2020-21

BE 2020-21

RE 2021-22

BE

Capital infusion for 4G spectrum- BSNL

14,115 0 14,115

Capital infusion for 4G spectrum-MTNL

6,295 0 6,295

Implementation of VRS (BSNL/MTNL)

3,295 2,160 3,000

Ex-gratia payment to voluntarily retiring employees (BSNL/MTNL)

9,899 11,206 0

Grants for payment of GST-BSNL

2,541 0 2,541

Grants for payment of GST-MTNL

1,133 0 1,133

Total 37,278 13,366 27,084

Note: RE: Revised Estimates; BE: Budget Estimates.


Figure 1 depicts the trend in the expenditure during

the 2011-22 period. During this period, the

expenditure has grown at a CAGR of 15%. The

higher increase in expenditure since 2015-16 as

compared to previous years is due to allocation

towards Bharatnet (a scheme to connect all gram panchayats through optical fibre) and Optical Fibre

Network for Defence Services schemes. The

increase in 2020-21 and 2021-22 is mainly due to

expenditure towards revival plan for BSNL and

MTNL.

Figure 1: Trend in expenditure (in Rs Crore)

Note: Revised Estimates used for 2020-21. Budget Estimates

used for 2021-22.

Sources: Expenditure Budget; Union Budget Documents; PRS.

Over the last 10 years, the actual expenditure by the

Department has varied significantly as compared to

the budget estimates (Figure 2). In 2015-16 and

2016-17, actual expenditure exceeded budget

estimates by 52% and 29% respectively. In 2019-

20, actual expenditure was 4% higher than the

budgeted expenditure. As per the revised estimates

-20%

0%

20%

40%

60%

80%

100%

-20,000

0

20,000

40,000

60,000

80,000

1,00,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure Year-on-year change (%)

Demand for Grants 2021-22: Telecom PRS Legislative Research

- 119 -

of 2020-21, expenditure is estimated to be 38% less

than the budget estimates.

Figure 2: Underspending – Department of

Telecommunications (2011-21)

Note: Revised Estimates used for 2020-21.


Major Expenditure Heads

In 2021-22, the allocation towards support to

Public Sector Undertakings (PSUs) is 47% of the

total allocation for the department (Rs 27,547

crore). Of this, Rs 26,244 crore (95%) has been

allocated towards the revival plan for BSNL and

MTNL (details in Table 2). The next highest

allocation is towards pension (26%), followed by

Bharatnet (12%), and network for defence services

scheme (9%). Allocation towards Bharatnet in

2021-22 is almost four times the allocation in 2019-

20.

Table 3: Major expenditure heads in 2021-22 (in

Rs crore)

Expenditure Head

2019-20 Actuals

2020-21 RE

2021-22 BE

CAGR (2019-20 to 2021-22)

Total support to PSUs

6,083 13,941 27,547 113%

Pension 13,451 14,481 15,350 7%

Bharatnet 1,729 5,500 7,000 101%

Network for defence services

4,705 4,000 5,200 5%

Compensation to TSPs

1,196 1,700 2,000 29%

Others 1,231 1,487 1,640 15%

Total 28,395 41,109 58,737 44%

Note: BE – Budget Estimate; RE – Revised Estimate; TSP:

Telecom Service Providers.


Figure 3: Composition of expenditure in 2021-22

Note: TSP – Telecom Service Providers


Universal Service Obligation Fund

The Universal Service Obligation Fund (USOF)

has been established to provide widespread, non-

discriminatory, and affordable access to quality

Information and Communication Technology

services to people in rural and remote areas.

The resources for the fund are raised through a

Universal Access Levy (UAL) which is 5% of the

Adjusted Gross Revenue (AGR) earned by all the

operators under various licenses currently.4

Adjusted Gross Revenue is the value of gross

revenue after deduction of taxes and

roaming/PSTN charges from Gross Revenue. UAL

is first credited to the Consolidated Fund of India

and then disbursed to the USOF as per the

budgetary proposal of the Department of

Telecommunications. The schemes being funded

through USOF include: (i) Bharatnet, (ii) setting up

of towers in left-wing extremism affected areas,

and (iii) comprehensive telecom development plan

for the north-east region.

A total expenditure of Rs 9,000 crore from this

fund has been allocated for 2021-22. This is an

annual increase of 75% over 2019-20. In recent

years, actual expenditure from USOF has been

considerably less than the budget estimates. In

2019-20, actual expenditure from USOF was 65%

less than the budget estimate. The corresponding

figure for 2017-18 and 2018-19 was 52% and 40%,

respectively.

-9%-14%

-26% -25%

52%

29%

-11%

-27%

4%

-38%-60%

-40%

-20%

0%

20%

40%

60%

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Total Support to

PSUs, 47%

Pension, 26%

BharatNet, 12%

Network for Defence Services, 9%

Compensation to TSPs, 3%Others, 3%


- 120 -

Figure 4: Expenditure from USOF (in Rs crore)



Balance of Funds under USOF

In its audit report of the Ministry of

Communications for the FY 2017-18, the

Comptroller and Auditor General of India (CAG)

observed that a large amount earned as UAL is yet

to be transferred to the USOF.5 As of December

2020, a total of Rs 55,217 crore is yet to be

transferred to the USOF by the central

government.6 Disbursal to the USOF has been a

small fraction of UAL over the years. A total of Rs

81,540 crore has been earned as UAL during the

2010-21 period, out of which only Rs 40,112 crore

has been disbursed (49%).6

The gap between disbursal and UAL has been high

over the years, which has led to a rise in balance

(Figure 5). Note that in January 2015, the Telecom

Regulatory Authority of India (TRAI) had observed

that the Department has not been able to devise

enough schemes to utilise the earnings of UAL.7 It

also recommended reducing UAL from 5% to 3%.7

The Standing Committee on Information

Technology (2018) noted that with increasing

outlay on schemes including Bharatnet, Mobile

Towers in Left Wing Extremism Affected Areas

Phase-II and Comprehensive Telecom

Development Plan for the North-East, the

utilisation of USOF funds will improve.4

Figure 5: UAL vs Disbursal vs Balance of USOF

2010-21 (in Rs crore)

Note: UAL: Universal Access Levy; Disbursal: Amount

transferred to USOF; Balance: Balance at the end of that

Financial Year.

Sources: USOF Website as accessed on February 13, 2021; PRS.

Bharatnet

Bharatnet aims to create a network to connect all

the Gram Panchayats (approx. 2.5 lakh GPs) by

broadband by laying around 6.5 lakh km of optical

fibre. It seeks to provide all telecom service

providers with non-discriminatory access to the

network. These service providers include mobile

operators, Internet Service Providers (ISPs), Cable

TV operators, content providers. Bharat

Broadband Network Limited (BBNL) is a special

purpose vehicle to create, operate, maintain, and

manage the BharatNet infrastructure. The project

is financed through the USOF. The estimated total

cost of the project is Rs 42,068 crore.4

BharatNet is divided into three phases. Phase-I to

connect 1.2 lakh GPs was completed in December

2017. Phase-II to connect the remaining GPs is

underway. Phase-III is earmarked for future

purposes. The scheme also aims to provide last-

mile connectivity through Wi-Fi by creating five

access points per GP (12.5 lakh Wi-Fi hotspots).8

Figure 6: Underspending-Bharatnet (2014-21)




towards Bharatnet, an annual increase of 101% over 2019-20. Between 2017-18 and 2019-20, the

actual expenditure under the scheme was much

lower as compared to the budget estimates. In

2020-21, the expenditure is estimated to be 8%

lower than the budget estimates (Figure 6).

Delay in Completion


Technology (2018) noted that although approved in

2011, the initial target of BharatNet had to be

revised in 2014 due to inadequate planning and

design, and unpreparedness to address the issues.9

Under the revised deadline, the phase-I was due by

March 2017 but could be completed by December

2017.9 The phase-II which was to be initially

completed by March 2019, the target was then

revised to March 2020.9, 10

As of February 2021, the project has not been completed. The Standing Committee on

Information Technology (2020) noted that the

0

2,000

4,000

6,000

8,000

10,000

12,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

BE Actuals

0

10,000

20,000

30,000

40,000

50,000

60,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

UAL Disbursal Balance

24%92%

430%

-57% -47% -71%-8%-100%

0%

100%

200%

300%

400%

500%20

14-1

5

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21


- 121 -

project is now estimated to be completed by August

2021.11 Thus, the estimated delay in the

completion of phase-II is about 2 years and 4

months. Table 4 shows the status of BharatNet as

of February 2020.12,13

Table 4: Status of BharatNet (February 2020)

Parameter Target Achievement Achievement

in %

Length of OFC laid*

6.5 lakh km

5.0 lakh km 77%

Number of panchayats where OFC laid*

2.5 lakh 1.65 lakh 66%

Number of panchayats which are service-ready*

2.5 lakh 1.53 lakh 61%

Number of panchayats where Wi-Fi installed#

2.5 lakh 1.05 lakh 42%

Number of panchayats where Wi-Fi operational#

2.5 lakh 0.64 lakh 26%

Note: *as of February 12, 2021, #as of February 15, 2021.

Sources: Website of BBNL as accessed on February 17, 2021; PRS.

Network for Defence Services

The Network for Defence Services project aims to

provide a dedicated pan-India optical fibre cable-

based network for use by defence services. The

original total sanctioned cost of the project was Rs

13,334 crore.4 In May 2018, the central

government announced that the budget of the

project has been increased to Rs 24,664 crore.14

BSNL is the implementing agency for the project.

A total of 60,000 km of the optical fibre network is

to be laid under this project. In 2021-22, Rs 5,200

crore has been allocated towards this project, an

annual increase of 5% over 2019-20. Under this scheme, in 2018-19, only 43% of the allotted fund

was utilised. In 2020-21, the expenditure is

estimated to be 20% less than the budget estimates

(Figure 7).

Figure 7: Allocation towards Network for

Defence Services



Delay in completion

The network for defence services project was to be

completed by July 2015.4 The revised deadline for

completion was set for May 2020, however, the

target was subsequently revised to December

2020.14 The Standing Committee on Information

Technology (2018) had observed that the delay has

resulted in massive cost overrun from the initial

estimation of Rs 8,098 crore in 2009 to Rs.24,664

crore in 2018 (205% increase).4

Non-Tax Revenue from communication services15, 16

Communication services are one of the major

sources of non-tax revenue of the central

government. In 2016-17, non-tax revenue from

communication services was the largest contributor

to the overall non-tax revenue of the central

government, accounting for 26% of the total.17

This includes receipts from spectrum auctions, one-

time fee from new operators and recurring license fees and spectrum charges from telecom service

providers which is a percentage share of the

Adjusted Gross Revenue (AGR) of the operators.

In 2021-22, non-tax revenue from communication

services is estimated to be Rs 53,987 crore, an

annual decrease of 12% over 2019-20. In 2020-21,

at the budget stage, non-tax revenue from

communication services was projected to be Rs

1,33,027 crore. However, as per the revised

estimates, this revenue is estimated to be Rs 33,737

crore, 75% less than the budget estimate.

Table 5: Non-tax revenue-communication

services (in Rs crore)

2019-20 Actuals

2020-21 BE

2020-21 RE

2021-22 BE

CAGR (19-20 to

21-22)

69,846 1,33,027 33,737 53,987 -12%


Source: Receipt Budget; Union Budget 2021-22; PRS.

Although budget documents do not provide clarity,

the significant increase in 2020-21 at the budget

stage could be due to: (i) anticipated recovery of

past dues from the service providers as per the

Supreme Court decision in October 2019 on the

definition of gross revenue, and (ii) spectrum

auction planned during the financial year.18 Note

that process for auction of the certain spectrum has

been initiated in January 2021 and the auction is

likely to be conducted on March 1, 2021.19 In

November 2019, the Union Cabinet had approved

deferred payment of spectrum auction instalments

due for years 2020-21 and 2021-22 to provide relief

to telecom service providers.20

0

1,000

2,000

3,000

4,000

5,000

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

BE Actuals


- 122 -

Figure 8: Non-tax revenue-communication

services (In Rs crore) (2011-21)

Note: Revised Estimates used for 2020-21. Budget Estimates

used for 2021-22.


At the end of 2019-20, the arrears of non-tax

revenue from communication services is 34% of

the total arrears of non-tax revenue of the central

government. Of the non-tax revenue overdue by

more than five years, the arrears of communication

services comprise a significant portion of the total

arrears (42%).

Table 6: Arrears of non-tax revenue from

communication services (in Rs crore) (at the end of reporting the year 2018-19)

Duration (Year)

Arrear-Communications

Arrear-Overall

%Share*

0-1 2,263 20,374 11%

1-2 2,687 23,329 12%

2-3 9,661 31,730 30%

3-5 9,630 41,457 23%

>5 89,638 2,15,539 42%

Total 1,13,879 3,32,429 34% Note: * % share indicates the share of non-tax revenue from

communication services in the total arrears of non-tax revenue

of the central government.

Source: Receipt Budget; Union Budget 2021-22; PRS.

Issues for Consideration

Digital divide

COVID-19 has brought focus on access to

communication services. During the nation-wide

lockdown, internet access became crucial for adults

to work from home and children to access

education. However, notable gaps exist in India

with regard to access to telecom services and use of internet. International Telecommunications Union

(ITU, 2019) notes that barriers are often related to

age, gender, socioeconomic status, and

geography.21 The Department of

Telecommunications (2020) had noted that India

has become the global leader in monthly data

consumption.22 The Department also noted that the

cost of data has reduced substantially thereby

enabling affordable internet access.22 Following

trends were observed with regard to the use of

internet services in India before the onset of

COVID-19 pandemic:

Regional Divide: The number of internet

subscribers per 100 inhabitants for the country on

aggregate was 55.1 as of March 2020. This was

lower than the global average for developing

countries in 2020 as per ITU (65.1).23 A substantial

inter-state variation is seen on this parameter

(Figure 10). This number was much lower for the

service areas of Bihar-Jharkhand (30.4) and Uttar

Pradesh-Uttarakhand (38.6). In comparison,

services areas in Punjab (83.5), Himachal (81.6),

and Kerala (75) performed considerably better than

the national average on this parameter.

Figure 10: Service-area wise internet

subscribers per 100 inhabitants (as of March

2020)

Note: Maharashtra & Goa includes Mumbai circle. Tamil Nadu

includes Chennai circle. West Bengal & Sikkim includes

Kolkata circle. Uttar Pradesh & Uttarakhand comprises UP East

and UP West circles. North-East comprises Arunachal Pradesh,

Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. Service

area also includes adjoining union territories.

Sources: Performance Indicator Reports-March 2020, TRAI;

PRS.

Rural-Urban Divide: As of March 2020, while the

number of internet subscribers per 100 inhabitants

in urban areas was 99.1, the corresponding number

for rural areas was 32.2, almost two-thirds less (Figure 9). The Standing Committee on

Information Technology (2020) had observed that

as of March 2020, there were 7,789 villages in the

country without telecom connectivity.11

-120%

-80%

-40%

0%

40%

80%

120%

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,00020

11-1

2

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Non-Tax Revenue Year-on-year change (%)

202.71

83.45

81.62

75.01

74.69

69.06

66.53

65.15

64.77

59.01

56.43

54.24

51.99

51.10

43.95

43.26

41.06

38.58

30.35

0 100 200 300

Delhi

Punjab

Himachal Pradesh

Kerala

Maharashtra & Goa

Karnataka

Tamil Nadu

Andhra Pradesh & Telangana

Gujarat

Haryana

Jammu & Kashmir

Rajasthan

North East

West Bengal & Sikkim

Orissa

Madhya Pradesh & Chhattisgarh

Assam

Uttar Pradesh & Uttarakhand

Bihar & Jharkhand


- 123 -

Figure 9: Subscribers per 100 inhabitants in

India (as of March 2020)

Source: Performance Indicator Reports-March 2020, TRAI;

PRS.

Gender gap: The first phase of the 5th round of the

National Family Health Survey (2019-20)

measured the proportion of men and women who

have ever used internet across 22 states and union

territories.24 Across all states, the proportion of

men who had used the internet was higher than

women, with the difference being higher than 25%

point in states such as Telangana, Gujarat, and

Andhra Pradesh. In states such as Andhra Pradesh,

Bihar, and Tripura, less than 25% of the surveyed

women had ever used internet. Across states, the

gap between proportion of men and women was

wider in rural areas as compared to urban areas.

Figure 11: Adults in 15-49 years age group who

have ever used internet (2019-20, Figures in %)

Source: Phase-I of Fifth Round of National Family Health

Survey; PRS.

Access to broadband

Communication can be classified among broadband

and narrowband based on the bandwidth required for communication. The broadband

communication uses a higher bandwidth and

provides better speed. Telecom Regulatory

Authority of India (2020) had observed that in the

post-COVID-19 pandemic era, there will be an

increasing reliance on the broadband connectivity

and demand for these services is likely to grow

much faster.25 TRAI observed that India needs to

improve in terms of access to fixed broadband as

well as the speed of broadband. At the end of

March 2020, only 7.6 out of 100 households had

access to fixed broadband.25

TRAI noted that as per a June 2020 report by a

private firm (Ookla), India experiences download

speeds of 12 Mbps in case of mobile broadband

and around 38 Mbps in case of fixed broadband.25

The corresponding global averages are 35 Mbps

and 78 Mbps, respectively.25 India ranked 129th

among 138 nations in mobile broadband speed and

75th among 174 countries in fixed broadband speed

according to the report by Ookla.25 TRAI observed

that India’s broadband speed is the lowest among

the BRICS countries (Figure 12).25 Note that the

National Digital Communications Policy 2018

seeks to provide broadband connectivity at 50

Mbps to every citizen by 2022.25

Figure 12: Broadband speed in BRICS countries

Source: TRAI; PRS.

In India, as of March 2020, 92% of internet

subscribers in India use a broadband connection.25

However, a broadband connection in India is

defined to have a minimum download speed of 512

kbps (kilo bits per second) to an individual

subscriber. In other countries, this threshold is

defined at a higher level. In USA, UK, and China, it is defined to be 25 Mbps (mega bits per second),

24 Mbps, and 20 Mbps, respectively.25

India’s preparedness for 5G

5G is the next technology frontier in the telecom

sector. According to the High-Level Forum of the

Department on 5G, 5G is predicted to create a

cumulative economic impact of USD one trillion in

India by 2035.26 As of January 2021, 118 operators

in 59 countries have deployed 5G network.27 Mostly, 5G has been launched partially in these

58.7932.24

142.3199.1287.37

55.12

0

60

120

180

Telecom Subcribers Internet Subcribers

Rural Urban Overall

0 20 40 60 80 100

Sikkim

Goa

Mizoram

Kerala

Nagaland

Himachal Pradesh

Manipur

Jammu & Kashmir

Maharashtra

Karnataka

Meghalaya

Gujarat

Assam

Telangana

West Bengal

Tripura

Andhra Pradesh

Bihar

Men Women

59.4 68.8

38.2

133.6

36.427.4 22.1 12.2

103.7

33.7

0

50

100

150

Brazil Russia India China South Africa

Fixed Mobile


- 124 -

countries. In India, commercial rollout of 5G is yet

to happen. The Standing Committee on

Information Technology (2021) examined India’s

preparedness for 5G.27 The Committee noted that

sufficient preparatory work has not been undertaken for the launch of 5G services in India.

It highlighted: (i) inadequate availability of

spectrum, (ii) high spectrum prices, (iii) poor

development of use cases for 5G, (iv) low status of

fiberisation, and (v) deficient backhaul capacity, as

some of the key concerns.27 It noted that as of

January 2021, 5G trials have not been permitted by

the department.27

Table 7: Deployment of telecom technology-

India vis-a-vis World Technology World India

2G 1991 1995

3G 1998 2008

4G 2008 2015

5G 2019 - Source: “21st Report: India’s preparedness for 5G”, February

2021, Standing Committee on Information Technology; PRS.

Allocation of 5G spectrum

Allocation of new bands of the spectrum is crucial

for the rollout of 5G. However, the auction of 5G

spectrum is still pending. The Committee noted the

concerns of the telecom companies that the reserve price set by TRAI (Rs 492 crore per MHz) for the

5G spectrum is exorbitantly high.27 It observed that

considering the financial stress in the sector and

that 5G ecosystem is yet to be developed, high

reserve price may have an adverse impact on the

abilities of service providers to roll out 5G.27 The

Committee further noted that based on the current

availability of spectrum, approximately 50 MHz

spectrum per operator can be ensured. This is

substantially lower than the global average (about

100 MHz).27 It noted that in case of 4G too, the

average spectrum per operator in India is around

one-fourth of the global average.27 The Committee

observed that there is an urgent need for audit of all

allocated spectrum for detecting under-utilisation

and subsequently rationalising the allocation of

spectrum.27

Spectrum Fees and Taxes

The Economic Survey of India (2017-18) noted

that the telecom sector is facing an issue of higher

spectrum charges.28 It observed that lower

spectrum charges will augment the spread of

telecommunication services and will help in socio-

economic transformation.28

TRAI (2015) had observed that the total effective

rate of the license-related levy has gone up

significantly in the recent past and that spectrum

prices in the country are amongst the highest in the

world.7 The total taxes and levies are as high as

30% of the revenue of an operator.7 This

adversely impacts the need to continue a low tariff

regime in the country. It had recommended that the

license fee should be reduced from 8% to 6% by

reducing Universal Access Levy from 5% to 3%.7

As of January 2021, the license fee is 8%.27 In 2017, TRAI, as well as the Department of

Telecommunications, had recommended lowering

General Service Tax (GST) from 18% to 5% and

12% respectively for the telecom sector.29 The

Standing Committee on Information Technology

(2021) also recommended that the central

government should consider rationalisation of

levies and duties on the telecom sector.27

Promotion of domestic manufacturing of

telecom equipment


Technology (2019) had observed that India is

highly dependent on the import of telecom equipment.30 During 2017-18 and 2018-19, India

imported telecom equipment worth Rs 1.4 lakh

crore and 1.2 lakh crore, respectively.30 The

Committee observed that this indicates a lack of

requisite ecosystem for the promotion of domestic

manufacturing.30 Some of the reasons for the

dependence on import are: (i) import of telecom

equipment at zero duty as per existing tariff

obligations under international treaties, (ii) low

investment in research and development and

creation of intellectual property rights, and (iii) lack

of market access for indigenous manufacturers.30

The Committee noted that imports are likely to

increase substantially with the introduction of

newer technology such as 5G.30


Technology (2021) also stressed on the importance

of enhancing domestic manufacturing capabilities

in view of the adoption of 5G. It observed that the

ecosystem should be developed for complete

manufacturing rather than just assembly, as

manufacturing gives higher value addition. The

Committee also highlighted the importance of

promotion of research and development for the

success of telecom manufacturing.27 The

Committee noted that in 2018, TRAI had proposed

the creation of a Telecom Research and

Development Fund with an initial corpus of Rs 1,000 crore for promoting research, innovation, and

manufacturing of indigenous telecommunications

equipment. It recommended that this fund should

be created at the earliest.27

Essential Services status for Telecom

The Standing Committee on Information Technology (2021) recommended that

telecommunications should be accorded the status

of essential service and telecom infrastructure

should be designated as a critical infrastructure of

the country.27


- 125 -

1 Demand No. 13, Demand for Grants, Union Budget 2021-22,

https://www.indiabudget.gov.in/doc/eb/dg13.pdf. 2 Expenditure Budget, Department of Telecommunications,


https://www.indiabudget.gov.in/doc/eb/sbe13.pdf. 3 “Union Cabinet approves revival plan of BSNL and MTNL

and in-principle merger of the two”, Cabinet, Press Information

Bureau, , October 23, 2019,

https://pib.gov.in/PressReleseDetail.aspx?PRID=1588848. 4 “47th Report: Demands for Grants (2018-19) of Department of

Telecommunications (Ministry of Communications)”, Standing

Committee on Information Technology, March 13, 2018,

http://164.100.47.193/lsscommittee/Information%20Technology

/16_Information_Technology_47.pdf. 5 “Report No 21 of 2018, Compliance and Performance Audit of

Ministry of Communications and Ministry of Electronics &

Information Technology”, CAG, 2018,

https://www.cag.gov.in/sites/default/files/audit_report_files/Rep

ort_No_21_of_2018_Compliance_and_Performance_Audit_of_

Union_Government_Ministry_of_Communications_.pdf. 6 “Statement showing the balance of UAL amount available as

potential fund under USO as on 31.12.2020”, Universal Service

Obligation Fund, Department of Telecommunications, website

as accessed on February 13, 2021, http://www.usof.gov.in/usof-

cms/usof-fund-status-table.jsp. 7 “Recommendations on Definition of Revenue Base (AGR) for

the Reckoning of Licence Fee and Spectrum Usage Charges”,

TRAI, January 6, 2015,

https://main.trai.gov.in/sites/default/files/Reco-AGR-Final-

06.01.2015_0.pdf. 8 “Telecom at a Glance”, Department of Telecommunications

Website as accessed on July 1, 2019,

http://dot.gov.in/sites/default/files/Telecom%20at%20a%20Glan

ce.pdf?download=1. 9 “50th Report: Progress of Implementation of BharatNet”,

Standing Committee on Information Technology, August 2018,


/16_Information_Technology_50.pdf. 10 Unstarred Question No 621, Rajya Sabha, Ministry of

Communications, June 27, 2019,

https://164.100.158.235/question/annex/249/Au621.pdf. 11 “6th Report: Demand for Grants (2020-21) of Department of

Communications (Ministry of Communications), Standing

Committee on Information Technology, March 2020,


/17_Information_Technology_6.pdf. 12 “BharatNet Status as on January 31, 2020”, Website of

BBNL as accessed on February 7,2020,

http://bbnl.nic.in/BharatNet.pdf. 13 “BharatNet Usage Statistics as on 03.02.2020”, Website of

BBNL as accessed on February 7, 2020,

http://www.bbnl.nic.in/usage2.pdf. 14 “Cabinet approves enhancement of budget for implementation

of Network for Spectrum for Defence Services”, Cabinet, Press

Information Bureau, May 16, 2018,

http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1532262. 15 Non-Tax Revenue, Union Budget, 2021-22,

https://www.indiabudget.gov.in/doc/rec/ntr.pdf.

16 Arrears of Non-Tax Revenue, Union Budget, 2021-22,

https://www.indiabudget.gov.in/doc/rec/annex6.pdf. 17 “Annual Report 2017-18”, Department of

Telecommunications,

http://dot.gov.in/sites/default/files/Telecommunications%20Ann

ual%20Report%202018%20ENGLISH_0.pdf. 18 Starred Question No 329, Lok Sabha, Ministry of

Communications, December 11, 2019,

http://164.100.24.220/loksabhaquestions/annex/172/AS329.pdf. 19 “Auction to commence online from March 1, 2021”, Press

Information Bureau, Ministry of Communications,

https://pib.gov.in/PressReleasePage.aspx?PRID=1686571. 20 “Cabinet approves proposal for Mitigating financial stress

being faced by the Telecom Services Sector”, Cabinet, Press

Information Bureau, November 20, 2019,

https://pib.gov.in/PressReleseDetail.aspx?PRID=1592553. 21 Website of International Telecommunications Union as

accessed on February 16, 2021, https://www.itu.int/en/ITU-

D/Statistics/Pages/stat/default.aspx. 22 Annual Report 2019-20, Department of Telecommunications,

April 6, 2020,

https://dot.gov.in/sites/default/files/Annual%20Report-2019-

20%28%20English%29.pdf. 23 Website of International Telecommunications Union as

accessed on February 16, 2021, 24 Key Indicators-22 States/UTs from Phase-I, 5th Round of

National Family Health Survey, http://rchiips.org/NFHS/NFHS-

5_FCTS/NFHS-

5%20State%20Factsheet%20Compendium_Phase-I.pdf. 25 “Consultation Paper on Roadmap to Promote Broadband

Connectivity and Enhanced Broadband Speed”, Telecom

Regulatory Authority of India, August 20, 2020,

https://trai.gov.in/sites/default/files/Broadband_CP_20082020_0

.pdf. 26 “Making India 5G Ready”, Report of the 5G High Level

Forum Prepared by Steering Committee, Department of

Telecommunications, August 23, 2018,

http://dot.gov.in/sites/default/files/5G%20Steering%20Committ

ee%20report%20v%2026.pdf. 27 “21st Report: India’s preparedness for 5G”, Standing

Committee on Information Technology, February 2021,


/17_Information_Technology_21.pdf. 28 Economic Survey of India 2017-18, Volume 1,

http://www.indiabudget.gov.in/economicsurvey/doc/echapter.pd

f. 29 Unstarred Question No 1509, Lok Sabha, Ministry of

Communications, June 27,2017,

https://eparlib.nic.in/bitstream/123456789/765718/1/AU1509_1

3_16.pdf. 30 “First Report: Demands for Grants (2019-20) of Department

of Telecommunications (Ministry of Communications)”,

Standing Committee on Information Technology, December

2019,


/17_Information_Technology_1.pdf.

https://www.indiabudget.gov.in/doc/eb/dg13.pdf


https://pib.gov.in/PressReleseDetail.aspx?PRID=1588848

http://164.100.47.193/lsscommittee/Information%20Technology/16_Information_Technology_47.pdf


https://www.cag.gov.in/sites/default/files/audit_report_files/Report_No_21_of_2018_Compliance_and_Performance_Audit_of_Union_Government_Ministry_of_Communications_.pdf



http://www.usof.gov.in/usof-cms/usof-fund-status-table.jsp

http://www.usof.gov.in/usof-cms/usof-fund-status-table.jsp

https://main.trai.gov.in/sites/default/files/Reco-AGR-Final-06.01.2015_0.pdf

https://main.trai.gov.in/sites/default/files/Reco-AGR-Final-06.01.2015_0.pdf

http://dot.gov.in/sites/default/files/Telecom%20at%20a%20Glance.pdf?download=1

http://dot.gov.in/sites/default/files/Telecom%20at%20a%20Glance.pdf?download=1



https://164.100.158.235/question/annex/249/Au621.pdf



http://www.bbnl.nic.in/usage2.pdf

http://www.pib.nic.in/PressReleseDetail.aspx?PRID=1532262

https://www.indiabudget.gov.in/doc/rec/ntr.pdf

https://www.indiabudget.gov.in/doc/rec/annex6.pdf

http://dot.gov.in/sites/default/files/Telecommunications%20Annual%20Report%202018%20ENGLISH_0.pdf

http://dot.gov.in/sites/default/files/Telecommunications%20Annual%20Report%202018%20ENGLISH_0.pdf


https://pib.gov.in/PressReleasePage.aspx?PRID=1686571

https://pib.gov.in/PressReleseDetail.aspx?PRID=1592553

https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx

https://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx

https://dot.gov.in/sites/default/files/Annual%20Report-2019-20%28%20English%29.pdf

https://dot.gov.in/sites/default/files/Annual%20Report-2019-20%28%20English%29.pdf

http://rchiips.org/NFHS/NFHS-5_FCTS/NFHS-5%20State%20Factsheet%20Compendium_Phase-I.pdf



https://trai.gov.in/sites/default/files/Broadband_CP_20082020_0.pdf

https://trai.gov.in/sites/default/files/Broadband_CP_20082020_0.pdf

http://dot.gov.in/sites/default/files/5G%20Steering%20Committee%20report%20v%2026.pdf

http://dot.gov.in/sites/default/files/5G%20Steering%20Committee%20report%20v%2026.pdf



http://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf

http://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf

https://eparlib.nic.in/bitstream/123456789/765718/1/AU1509_13_16.pdf

https://eparlib.nic.in/bitstream/123456789/765718/1/AU1509_13_16.pdf



- 126 -

Demand for Grants: Housing and Urban

Affairs The Ministry of Housing and Urban Affairs

formulates policies, coordinates activities of various agencies (at the state and municipal level),

and monitors programmes in the area of urban

development. It also provides states and urban

local bodies (ULBs) with financial assistance

through various centrally supported schemes. In

2017, the Ministry of Housing and Poverty

Alleviation, and the Ministry of Urban

Development were combined to form the Ministry

of Housing and Urban Affairs.

This note looks at the expenditure incurred by the

Ministry, the status of the various schemes implemented by it, and the issues faced with

investment required for urban planning.


Allocation in Budget 2021-22

The total expenditure on the Ministry of Housing

and Urban Affairs for 2021-22 is estimated at Rs

54,581 crore.1 This is an annual increase of 14%

over the actual expenditure for 2019-20. In 2021-

22, the revenue expenditure of the Ministry is

estimated at Rs 28,822 crore (53% of the total expenditure) and the capital expenditure is

estimated at Rs 25,759 crore (47% of the total

budget). Since 2014-15, the Ministry’s revenue

expenditure has been higher than its capital

expenditure. This may indicate that the Ministry is

spending less on creation of assets.

Table 1: Budget allocations for the Ministry of

Housing and Urban Affairs (in Rs crore)

2019-20 Actuals

2020-21 RE

2021-22 BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Revenue 22,749 36,482 28,822 13%

Capital 19,305 10,309 25,759 16%

Total 42,054 46,791 54,581 14%

Notes: BE – Budget Estimate; RE – Revised Estimate. Sources: Demand No. 59, Ministry of Housing and Urban

Affairs Union Budget 2021-22; PRS.

Expenditure trends

Between 2011 and 2021, the expenditure of the

Ministry has increased at an average annual rate of

19% (Figure 1).

Figure 1: Trend in expenditure (2011-22)

(Rs crore)

Note: For the years 2011-12 till 2015-16, the figures are a

combination of the erstwhile Ministry of Housing and Urban

Poverty Alleviation, and the Ministry of Urban Development.

Values for 2020-21 and 2021-22 are revised and budget

estimates respectively. All other figures are actuals.

Sources: Ministry of Housing and Urban Poverty Alleviation,

and the Ministry of Urban Development budgets 2011-12 to

2015-16. Ministry of Housing and Urban Affairs budget

documents 2015-16 to 2021-22; PRS.

-10.0%

10.0%

30.0%

50.0%

70.0%

90.0%

-10,000

0

10,000

20,000

30,000

40,000

50,000

60,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

Expenditure Annual growth

Key highlights from budget speech 2021-22

In the budget speech, the Finance Minister made the following announcements regarding the housing and urban development sector: ▪ The Jal Jeevan Mission (Urban) will be launched to

ensure universal water supply in all 4,378 urban local bodies in India and enable liquid waste management in 500 cities under the AMRUT scheme. The Mission has an outlay of Rs 2.8 lakh crore for 2021-26.

▪ Urban Swachh Bharat Mission 2.0 will focus on: (i) sludge management, (ii) waste water treatment, (iii) source segregation of garbage, (iv) reduction in single-use plastics, (v) control of air pollution by waste management in construction, demolition and bio-remediation dump sites. The Mission will have an outlay of Rs 1.41 lakh crore between 2021-26.

▪ Metro rail networks will be expanded by using new technologies in Tier-1 and Tier-2 cities. Central funding of Rs 88,059 crore will be provided to four projects.

▪ Public bus transport services will be augmented by deploying public-private partnerships to finance and maintain over 20,000 buses. The scheme has been allocated Rs 18,000 crore.

▪ Affordable housing projects can avail a tax holiday until March 31, 2022. Eligibility for tax deductions for affordable housing announced in the 2019-20 budget has also been extended till March, 2022. This tax deduction can be of up to 1.5 lakh rupees and will be provided on interest paid on loans for self-occupied house owners.

Demand for Grants 2021-22: Housing and Urban Affairs PRS Legislative Research

- 127 -

The Standing Committee on Urban Development,

(2020) had noted that the budgetary allocations to

the Ministry were lower than the Ministry’s

demand between 2018-21.2 This has also been

observed in earlier budget allocations. For

instance, in 2017-18, while the erstwhile Ministry

of Urban Development projected an expenditure of

Rs 68,410 crore, it was allocated Rs 34,212 crore in

that year’s budget.3

The Committee further suggested that with the

implementation of schemes picking momentum, the

allocation towards them should be increased for

better implementation.2 This would also

supplement efforts of state governments to develop

and maintain urban infrastructure.2

The Standing Committee on Urban Development

(2019) noted that extra budgetary resources have

been used to reduce the gap between the demand

and the budgetary allocations.4 However, the

actual expenditure by the Ministry has been lower

than the budget estimates since 2016-17 (Figure 2).

The Standing Committee (2020) has recommended

the Ministry to avoid such under-utilisation of

funds.2

Figure 2: Deviation in actual expenditure from budgeted expenditure (2011-21)

Note: For the years 2011-12 till 2015-16, the figures are a

combination of the erstwhile Ministry of Housing and Urban

Poverty Alleviation, and the Ministry of Urban Development.

Values for 2020-21 are revised estimates. All other figures are

actuals.


Major schemes and issues

The Ministry implements several centrally

sponsored schemes, and a few central sector

schemes. These include: (i) Pradhan mantri Awas

Yojana – Urban (PMAY-U), (ii) Atal Mission for

Rejuvenation and Urban Transformation

(AMRUT), (iii) 100 Smart Cities Mission, (iv)

Swachh Bharat Mission – Urban (SBM-U), and (v) Deendayal Antyodaya Yojana-National Urban

Livelihood Mission (DAY-NULM). The Ministry

also develops and manages metro rail projects

across the country.

Of the expenditure allocated to the Ministry in

2021-22, the highest allocation is towards metro

projects at 43% of the total budget. The allocation

towards the key schemes is shown in Table 2 and

Figure 3.

Figure 3: Budgetary allocation for Ministry of

Housing and Urban Affairs (2021-22)

Sources: Notes on Demand for Grants 2021-22, Ministry of

Housing and Urban Affairs; PRS.

Table 2: Allocations in the Ministry (Rs crore)

2019-20 Actual

2020-21 RE

2021-22 BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Metro 18,908 9,000 23,500 11%

PMAY (Urban)

6,848 21,000 8,000 8%

AMRUT 6,392 6,450 7,300 7%

Smart Cities 3,207 3,400 6,450 42%

SBM (Urban) 1,256 1,000 2,300 35%

DAY-NULM 732 795 795 4%

Projects in North-Eastern Region

363 125 120 -42%

Others - 142 200

Total 4,349 4,879 5,916 17%

Notes: BE – Budget Estimate; RE – Revised Estimate. Sources: Expenditure Budget 2021-22; PRS.

Metro Rail Projects

The Ministry of Housing and Urban Affairs is

responsible for urban transport which includes

metro rail projects. Investments in these projects

are made in various forms including grants, equity investments, debt, and pass-through assistance

(grants given to the government which can be

awarded to other organisations) for externally aided

projects.

As of February 2021, metro rail systems are

operational and under construction in 27 cities.5

-1%

-13% -12%

-39%

-19%

23%

-1% -3%

-12%-6%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Metro43%

PMAY (Urban)15%

AMRUT13%

Smart Cities12%

SBM (Urban)

4%

Others13%


- 128 -

702 km of metro lines are operational, while 1,016

km are under implementation.5 These have been

set up as a 50:50 joint venture between the central

government and the respective state and union

territory governments.

Allocation towards metro projects includes

allocation towards the National Capital Region

Transport Corporation of Delhi (the implementing

agency for the Regional Rapid Transit System in

the National Capital Region). In 2021-22, Rs

23,500 crore has been allocated towards metro

projects. This is an annual increase of 24%

increase over the actual expenditure in 2019-20. In

2020, the allocation towards metro projects was

decreased by 55% in the revised estimates. The

table below shows the trends in allocations and

expenditure towards metro projects.

Table 3: Allocation towards metro projects (in

Rs crore)

Year Budgeted Actuals % utilised

2014-15 8,026 5,998 75%

2015-16 8,260 9,300 113%

2016-17 10,000 15,327 153%

2017-18 18,000 13,978 78%

2018-19 15,000 14,470 96%

2019-20 19,152 18,908 99%

2020-21* 20,000 9,000 45%

2021-22 23,500 - -

Note: *Actuals for 2020-21 indicate Revised Estimates.

Sources: Ministry of Housing and Urban Affairs Budget

documents 2014-15 to 2021-22; PRS.

High allocation: In 2021-22, the capital

expenditure on metro projects is estimated to be

90% of the Ministry’s total capital expenditure.


(2017) noted that a high allocation towards metro

projects leads to inadequate funds for other projects such as the PMAY(Urban) scheme.3 The Standing

Committee (2019) had recommended that state/UT

governments must be consulted to find ways to

reduce the huge outlay on metro works to enable

adequate funding for other schemes.4

The Standing Committee (2020) while reviewing

measures to reduce the cost of projects observed

that with increased standardisation and use of

newer technologies like MetroLite, the cost of

projects had decreased.6

Planning of metro systems: The National

Transport Development Policy Committee

(NTDPC) report had observed that high speed mass

transit systems such as metro rail do not always

reduce door-to-door travel time. Door-to-door

travel time is seen as the most relevant indicator for

users.7 Underground or elevated transport systems

do not save time as compared to cars or two-

wheelers, when trip distances are short, because

time is lost in walking from ground level to the

platform level. Metro rail systems are efficient

only when the average trip distance is greater than

12 km. Indian cities, because of their mixed land

use patterns and higher density development, have

shorter trip lengths, and hence are better suited for

non-motorised travel.

The NTDPC had recommended that the decision to

implement metro rail projects should also consider

the high-cost factor. Rail-based metro systems

should be considered after examining the

opportunity cost of investing in expensive fixed

infrastructure.7

The NTDPC had recommended that metro rail

projects should initially be limited to cities with

population more than five million. Further, the

cities should be able to cover all costs through user

charges or fiscal costs. The NTDPC had also

recommended that Indian cities should focus on

improving their existing bus systems, adding bus

rapid transit (BRT) systems, and improving non-

motorised transport.

Last mile connectivity: The Standing Committee

on Urban Development (2019) highlighted the need to promote door-to-door connectivity of the Delhi

Metro. It had suggested that cab aggregator

services could employ auto rickshaws and cycle

rickshaws to remedy this.4

The Ministry has stated that as of September, 2020,

there are 800 e-rickshaws are operational from 20

metro stations. Further, 124 feeder buses are run

on 32 routes connecting 69 stations. E-scooter

services are operational in four stations and cycle

sharing services are provided in 16 metro stations.2

In September 2020, the Committee observed that

steps taken to promote last mile connectivity were

inadequate in view of rising ridership or in

formulative stages of implementation.2

Pradhan Mantri Awas Yojana - Urban

(PMAY-U)

The housing shortage is expected to reach two

crore by 2022.8 It was estimated that about 56% of this shortage falls in the Economically Weaker

Sections (EWS), 40% in the Lower Income Group

(LIG) category, and the rest 4% in the middle and

higher income groups. The Ministry estimates the

demand for housing at around one crore.9

PMAY-U is an affordable housing scheme being

implemented from 2015 to 2022. It seeks to

achieve the ‘housing for all target’ by 2022.

The scheme comprises four components: (i) in-situ

rehabilitation of existing slum dwellers (using the

existing land under slums to provide houses to slum


- 129 -

dwellers) through private participation, (ii) credit

linked subsidy scheme (CLSS) for Economically

Weaker Sections, Lower Income Groups, and

middle-income group (MIG), (iii) affordable

housing in partnership, and (iv) subsidy for

beneficiary-led individual house construction. The

Ministry provides central assistance to ULBs for

the implementation of the scheme through the respective state governments. So far 4,424 cities

have been covered under PMAY-U.10 As of

February, 2021, 1.1 crore houses have been

sanctioned as part of the scheme.

Allocation: The budgetary allocation towards the

scheme for 2021-22 is Rs 8,000 crore. This is an

8% increase over the actual expenditure in 2019-20

(Rs 6,848 crore). In 2020-21, revised estimates

increased by 163% in comparison to budgeted

allocation for the year. This can be attributed to the

Affordable Rental Housing Complexes (ARHC) scheme implemented under the Aatma Nirbhar

Bharat Scheme. The ARHC scheme seeks to

convert government-owned projects and housing

stock (projects available with the central

government) to affordable housing through public-

private partnerships and encourage development on

private land by giving special incentives including

streamlining of permits and credit. Funding

towards the scheme comes from the Central Road

and Infrastructure Fund (comprises of a cess

imposed along with excise duty on petrol and

diesel). In 2021-22, from the total allocation for

PMAY-U, the maximum (59%) is estimated to go

towards interest payment against loans raised

through extra budgetary sources (EBR) for the

scheme.

Table 4: Key components under PMAY-U (in Rs

crore)

2019-20

Actual

2020-21

RE

2021-22

BE

Change (Annualised)

(Actuals 2019-20 to

BE 2021-22)

Interest Payment against loan raised through EBR

3,069 4,148 4,720 24%

Central assistance to states/ UTs

2,633 9,803 1,542 -23%

CLSS-I for EWS/LIG

600 3,750 1,000 29%

CLSS-II for MIG 400 3,000 0.1 -98%

Others 146 299 738 125%

Total 6,848 21,000 8,000 8%

Notes: BE – Budget Estimate; RE – Revised Estimate. Sources: Expenditure Budget 2021-22; PRS.

The credit linked subsidy scheme component will

receive 13%, and 19% will be provided to states

and UTs as central assistance.

There has been a decline in allocation to some

components of the scheme in 2021-22 in

comparison to revised estimates for 2020-21.

Allocation to central assistance declined by 84%,

CLSS has lowered by 73% in 2021-22 allocation in

comparison to revised estimates for 2020-21.

House construction: Between the launch of the

scheme in 2015 and February 8, 2020, 110 lakh

houses have been approved.11 Of this, 36% houses

have been constructed. Note that these numbers

also include some houses sanctioned under the earlier scheme, Jawaharlal Nehru National Urban

Renewal Mission. The aim of the Mission is to

encourage reforms and fast track planned

development of identified cities (like cities with

more than 10 lakhs population as per the 2001

census).

Table 5: Progress under PMAY-U

House construction (in lakhs)

Houses sanctioned 110

Under construction 73 64% of the approved houses

Completed 43 36% of the approved houses

Central assistance (in Rs crore)

Central assistance sanctioned

1,77,410

Of which central assistance released

85,247 48% of the sanctioned assistance

Note: The total houses approved includes some houses that were

sanctioned under the earlier Jawaharlal Nehru National Urban

Renewal Mission.

Sources: PMAY-U MIS; as of February 12, 2021, PRS.

With the target of the scheme at 100 lakh houses by

2022, and 42.2 lakh houses been constructed so far,

it is unclear how the central government will

construct the remaining houses (almost 64% of the

target) in two years.


(2019) had noted that the estimated demand for

housing projects under PMAY-U was Rs 1,80,000

crore, as on October 28, 2019.4 The total central

assistance sanctioned was Rs 1,42,000 crore, out of

which Rs 57,896 crore had been released. It

recommended ensuring timely release of funds to

achieve the goal of ‘Housing for All’ by 2022.6

The government stated that funds are released to

states in stages based on compliance by states and

utilisation of earlier funds. In 2020-21, as of February, 2021, 80% of the funds sanctioned to

states was utilised.6 The Standing Committee on

Urban Development (2020) recommended


- 130 -

establishing a system to incentivise better

performing states under the scheme.2

Lending by housing finance companies: Both

housing finance companies (HFCs), and public

sector banks offer low-cost funding for housing.

HFCs have an 80% share in the implementation of

the CLSS component of PMAY-U.13 However,

banks and financing companies face constraints

such as inability to access long term funds.13

The Union Cabinet had approved the creation of a

National Urban Housing Fund (NUHF) worth Rs

60,000 crore in February 2018.12 The NUHF aims

to raise funds till 2022 to ensure a sustained flow of

central release under PMAY-U to enable

construction of houses.

Rental housing: As per the 2011 census, 27.5% of

urban residents lived in rented houses. According

to the Report of the Group of Secretaries (2017), a

rental housing scheme could further complement

PMAY-U in achieving the housing target.13 The

Ministry proposed a Draft National Urban Housing

Policy in October 2015.14 It seeks to promote the

sustainable development of house ownership with a

view to ensuring an equitable supply of rental

housing at affordable prices. The Ministry also released the Draft Model Tenancy Acts in 2015,

2019, and 2020 to provide for the regulation and

speedy adjudication of matters related to rental

housing, and repeal the existing state rent control

laws.15,16

Urban Rejuvenation Mission: AMRUT and

Smart Cities Mission

The Atal Mission for Rejuvenation of Urban

Transformation (AMRUT) Mission was launched

in June 2015.17 It seeks to provide basic services

(such as water supply, sewerage, and urban

transport) in cities, especially to the poorer

households.

In 2021-22, the AMRUT Mission has been

allocated Rs 7,300 crore. This is a 7% annualised

increase in the actual expenditure for 2019-20.

It is a Centrally Sponsored Scheme and was

allocated a total central assistance of Rs 50,000 crore between 2015-20. In 2020, the scheme

timeline was extended till 2022.6

The government had proposed that the outlay of Rs

50,000 be spent by 2020. However, from 2015-16

to 2021-22, the Ministry has allocated Rs 40,899

crore (82% of the proposed amount), and spent Rs

31,526 crore (63% of the proposed amount).2

Table 6 compares the actual expenditure against the

allocation towards AMRUT.

Table 6: Allocation compared to actual

expenditure (Rs crore)

Year Allocated Actual % utilisation

(actuals/ budget)

2015-16 3,919 2,702 69%

2016-17 4,080 4,864 119%

2017-18 5,000 4,936 99%

2018-19 6,000 6,183 103%

2019-20 7,300 6,391 88%

2020-21 7,300 6450* 88%

2021-22 7,300

Total 40,899 31,526 77%

Note: *Revised Estimate.

Sources: Ministry of Housing and Urban Affairs Demand for

Grants for the years 2015-16 to 2021-22; PRS.


(2020) has highlighted implementation and

performance under the scheme to be below target.2

For instance, 92% of funds under AMRUT were

allocated for water supply and sewerage.6

However, against the target of 139 lakh, only 71

lakh connections (51% of the target) had been

established. Of the target of 145 lakh sewerage connections, only 43 lakh (30% of the target) had

been provided.2

The Smart Cities Mission aims to develop cities

that provide core infrastructure and apply ‘smart’

solutions to give its citizens a decent quality of life

to its citizens, and a sustainable environment.18

100 cities have been selected under the Mission,

which were selected based on a Smart City

challenge. The cities were evaluated based on their

Smart City Plans which consisted of a pan city

development strategy and an area-based

development strategy.

The mission is being operated as a Centrally

Sponsored Scheme. The central government

provides financial assistance of up to Rs 48,000

crore over five years (2015-20).18 The states and

ULBs will have to contribute an equal amount, and

generate the additional amount as required through

other sources such as borrowings, and municipal

bonds.18

The Smart Cities Mission has been allocated Rs

6,450 crore in 2021-22, which is an annual increase

of 42% over the actual expenditure for 2019-20.

Between 2015-16 and 2021-22, 71% of the

proposed allocation has been allocated at the

budget stage. Between 2015-16 and 2020-21, 48%

of the proposed allocation has been spent.


- 131 -

Table 7: Allocation towards Smart Cities

Mission (in Rs crore)

Year Budgeted Actuals % utilised

2015-16 2,020 1,484 73%

2016-17 3,215 4,412 137%

2017-18 4,000 4,526 113%

2018-19 6,169 5,902 96%

2019-20 6,450 3,135 49%

2020-21 6,136 3,384* 55%

2021-22 6,118

Total 34,108 22,843 67%

*Revised estimates.

Sources: Budget documents 2015-16 to 2021-22; PRS.


(2020) stated that the significant reduction of

allocation towards the mission in the revised stages for 2019-20 and 2020-21 was undesirable.2 It

stated that funds allocated must be utilised

adequately.2

So far, all the 100 selected Smart cities have

formed their Special Purpose Vehicles (SPVs) and

appointed Project Management Consultants

(PMCs).19 Table 8 provides the status of the smart

city projects.20

Table 8: Status of smart city projects (as on

January, 2021) (in Rs crore)

Project status

No. of projects

% of projects

Cost % of cost

Total Proposed

5,151 - 2,05,018 -

Tendered 788 15% 35,309 17%

Work orders issued

2,441 47% 1,06,187 52%

Completed 2,187 42% 35,413 17% Sources: Unstarred Question No. 1020, Ministry of Housing and

Urban Affairs, Rajya Sabha, February 10, 2021; PRS.


(2020) has also observed that progress under the

mission has been uneven, since states such as Andhra Pradesh, Gujarat and Uttar Pradesh have

performed well, while states such as Bihar and

Tamil Nadu are lagging behind.6 The Committee

recommended strengthening existing monitoring

mechanisms across states to ensure faster

implementation.6

Swachh Bharat Mission – Urban (SBM-U)

Swachh Bharat Mission (SBM), launched in

October 2014, aims to eliminate open defecation and achieve scientific management of municipal

solid waste in all statutory towns by 2019.21,22

38.7% of districts in India were free from open

defecation in 2014, when the Swachh Bharat

Mission was launched.23 100% of districts were

declared to be free from open defecation in

October, 2020 by the central government. Of

these, 98% have been verified by the Ministry to be

free from open defecation.24 As of February 2021,

62.39 lakh household toilets have been built in

urban areas under the Mission, (105% of the target

59.57 lakh toilets set for 2020).24

Table 9 shows the number of toilets constructed as

on February 8, 2021, as compared to the targets set

for October 2019.

Table 9: Achievements under SBM- Urban (as

on February 11, 2020) Target Completed % Achieved

Individual Household Latrines

62,39,742 59,57,471 105%

Community and Public Toilets

6,01,556 5,07,589 119%

Sources: Swachh Bharat Mission Urban - Dashboard; PRS.


(2020) has highlighted that toilets built under the

scheme in areas including East Delhi have very

poor quality and do not have adequate

maintenance.6 Further, only 1,304 (30%) of the

4,320 cities declared to be open defecation free

have toilets with water, maintenance and hygiene.2

The total estimated cost of implementation of

SBM-U is Rs 62,009 crore. Of this, the share of

the central government is Rs 14,623 crore, and

states’ assistance will amount to Rs 4,874 crore.

The remainder is to be financed via various sources

such as the private sector, Swachh Bharat Kosh,

market borrowing, and external assistance.25


towards the scheme. This is an annual increase of

35% over actual expenditure for 2019-20. Further,

in her budget speech, the Finance Minister

announced that the Urban Swachh Bharat Mission

2.0 will be launched. The Mission will have an

outlay of Rs 1.41 lakh crore between 2021-26.5

The mission will focus on outcomes including:

Certifications for statutory towns: The Mission

aims to ensure that: (i) all statutory towns be certified as ODF+, and (ii) statutory towns with

less than one lakh residents be certified as ODF++.

A town is certified as ODF+ when no cases of open

defecation are recorded and all public toilets are

maintained and function. A town certified as

ODF++ is one where all sewage is safely managed

and treated with no dumping of untreated sewage in

water bodies or open areas.26 As of February 15,

2021, there are 1,742 towns certified as ODF+ and

538 certified as ODF++.27


- 132 -

Garbage free cities: All statutory towns will be at

least three-star garbage free rated as per the

Ministry’s Star Rating Protocol for Garbage Free

cities.26 The protocol is a framework where each

ward in each city is graded across 25 parameters to

measure solid waste management. 1,435 cities

have applied for certification under the protocol.28

As of February 2021, 72 towns have been awarded three stars and six towns have been given a five-

star rating based on the protocol.29

Besides these, the Mission seeks to ensure bio-

remediation of all legacy dumpsites. Under the

mission, 50% of all statutory towns with less than

one lakh residents will also be certified as

Water+.26 All wastewater in such a town must be

treated before being released into the

environment.30

Other issues to consider

Additional investment required

The pace of urbanisation is increasing in the

country. As per the 2011 census, around 31% of

the country’s population resided in urban areas. By

2031, around 600 million (43%) people are

expected to live in urban areas, an increase of over

200 million in 20 years. 31 Given the pace of

urbanisation, large capital investment is needed for infrastructure projects which would require support

from central and state governments in the form of

capital grants.

With the current rate of urbanisation, the High-

Powered Expert Committee (HPEC) for Estimating

the Investment Requirements for Urban

Infrastructure Services (2011) had estimated a

requirement of Rs 39 lakh crore (at 2009-10) prices

for the period from 2012-2031.32 As per their

framework, the investment in urban infrastructure

should increase from 0.7% of GDP in 2011-12 to

1.1% of GDP by 2031-32. In 2021-22, the estimated expenditure by the Ministry of Housing

and Urban Affairs is 0.4% of the GDP.33

The Ministry of Finance (2017) had noted that

budgetary outlays alone will not be enough to

service the growing demands on local governments

for improving their infrastructure.34 Alternate

sources of financing are required to meet the

funding gap.34 The flagship schemes of the

Ministry (such as Smart Cities Mission, Swachh

Bharat Mission) seek to meet their financing

requirements through a mix of sources such as borrowings, municipal bond financing, and PPPs.


(2020) noted that as of March 2020, municipal

bonds worth Rs 3,390 crore had been issued in

eight cities including Ahmedabad and Pune for the

implementation of AMRUT scheme.6

Financial capacity of cities

The Constitution (74th Amendment) Act, 1992 devolved certain functions relating to urban

development to ULBs, including the power to

collect certain taxes. These functions include urban

planning, planning for economic and social

development, and urban poverty alleviation. The

new schemes under the Ministry, seek to

decentralise the planning process to the city and

state level, by giving them more decision-making

powers. This implies that a significant share of the

funding needs to be raised by the cities themselves.

However, there is an imbalance between the

functions and finances of ULBs.35 The ULBs in India are amongst the weakest in the world both in

terms of capacity to raise resources and financial

autonomy.32 Municipal revenue in India accounts

for only one percent of the GDP (2017-18).36 The

share of own revenue for ULBs has declined from

63% in 2002-03 to 53% in 2007-08, and to 44% in

2015-16.37,38 Several states have not devolved

enough taxation powers to local bodies. Further,

local governments collect only a small fraction of

their potential tax revenue.32

While the central and state governments provide the ULBs with funds, these devolved funds are

largely tied in nature, to either specific sectors or

schemes. This constrains the spending flexibility

of ULBs.

PPPs have been an important instrument to finance

and develop infrastructure projects. However,

projects in many sectors such as water-supply and

urban transportation require support from ULBs in

the form of additional financial resources. The

Ministry of Finance has observed that an inability

to service such funding requirements constrains

project implementation.34

In such cases, ULBs can access capital markets

through issuance of municipal bonds. Municipal

bonds are marketable debt instruments issued by

ULBs, the funds raised may be used for capital

projects, refinancing of existing loans, and meeting

working capital requirements. The Securities and

Exchange Board of India regulations (2015)

regarding municipal bonds provide that, to issue

such bonds, municipalities must: (i) not have

negative net worth in any of the three preceding

financial years, and (ii) not have defaulted in any loan repayments in the last one year.39 Therefore, a

city’s performance in the bond market depends on

its fiscal performance.

To improve the finances of the ULBs, the HPEC

had recommended that state governments share a

pre-specified percentage of their revenues from all

taxes on goods and services with ULBs.32 It had


- 133 -

recommended mandating this constitutionally.

Further, ULBs should be provided with formula-

based transfers, and grants-in-aid.32 The ULBs

could raise their own revenue by tapping into land-

based financing sources, and improving non-tax

revenues (such as water and sewerage charges, and

parking fee).32

The Second Administrative Commission (2007)

had recommended that the central government

provide additional funds and facilitate additional

funding mechanisms for ULBs to strengthen their

finances.40

The 15th Finance Commission (2021) has

recommended that Rs 1.2 lakh crore be allocated to

urban local bodies as grants.41

1 Demand No. 59, Ministry of Housing and Urban Affairs,


https://www.indiabudget.gov.in/doc/eb/sbe59.pdf. 2 “4th Report of the Standing Committee on Urban Development

on Action taken by the Government on the Observations/

Recommendations contained in the Second Report on Demands

for Grants (2020-21) of the Ministry of Housing and Urban

Affairs”, September 11, 2020,

http://164.100.47.193/lsscommittee/Urban%20Development/17_

Urban_Development_4.pdf. 3 15th report, Standing Committee on Urban development, March

2017,


Urban_Development_15.pdf. 4 “1st Report of the Standing Committee on Urban Development

(2019-20) on Demands for Grants (2019-20) of the Ministry of

Housing and Urban Affairs, December 11, 2019,


Urban_Development_1.pdf. 5 Union Budget Speech 2021-21, February 1, 2021,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 6 “2nd Report of the Standing Committee on Urban Development

(2020-21) on Demands for Grants (2020-21) of the Ministry of

Housing and Urban Affairs, December 3, 2020,


Urban_Development_2.pdf. 7 “India Transport Report: Moving India to 2032”, National

Transport Development Policy Committee, June 17, 2014,

http://planningcommission.nic.in/sectors/index.php?sectors=Nat

ional%20Transport%20Development%20Policy%20Committee

%20(NTDPC). 8 “6th Report: Demands for Grants (2015-16) of Ministry of

Housing and Urban Poverty Alleviation”, Standing Committee

on Urban Development, April 27, 2015. 9 Unstarred Question No.1439, Ministry of Housing and Urban

Affairs, Lok Sabha, February 12, 2019,

http://164.100.24.220/loksabhaquestions/annex/17/AU1439.pdf. 10 Progress under PMAY (U), Ministry of Housing and Urban

Affairs, Last accessed on February 10, 2021, https://pmay-

urban.gov.in/pmayprogress. 11 Pradhan Mantri Awas Yojana - Urban MIS, Ministry of

Housing and Urban Affairs, https://pmay-

urban.gov.in/uploads/progress-pdfs/60227e8146f62-1.pdf.

Technical capacity of the ULBs

It has been observed in the urban sector that the allocation of funds from the central government did

not play a role in the implementation of the

projects.32 On the other hand, while ULBs and

states implemented the projects, they did not raise

the funds. The new schemes seek to empower

ULBs to raise their own revenue. Both the national

missions, AMRUT and Smart Cities, have a

component for capacity building of ULBs.

The HPEC (2011) had observed that municipal

administration has suffered due to (i) presence of

untrained and unskilled manpower, and (ii)

shortage of qualified technical staff and managerial supervisors.32 It had recommended improving the

technical capacity of ULBs. This can be achieved

by providing technical assistance to state

governments, and ULBs in planning, financing,

monitoring, and operation of urban programs.

12 “Cabinet approves creation of national Urban Housing Fund”,

Press Information Bureau, Ministry of Housing and Urban

Affairs, February 22, 2018,

http://pib.nic.in/newsite/PrintRelease.aspx?relid=176687. 13 Report of the Group of Secretaries, Group 4- Health,

Sanitation and Urban Development, January 2017,

https://smartnet.niua.org/sites/default/files/resources/report_of_s

ectoral_group_of_secretaries_on_health_sanitation_urban_devel

opment.pdf. 14 Draft National Urban Housing Policy, Ministry of Housing

and Urban Affairs website, October, 2015,

http://mohua.gov.in/upload/uploadfiles/files/National_Urban_Re

ntal_Housing_Policy_Draft_2015.pdf. 15 The Model Tenancy Act, 2019, Ministry of Housing and

Urban Affairs, July 10, 2019,

http://mohua.gov.in/upload/whatsnew/5d25fb70671ebdraft%20

Model%20Tenancy%20Act,%202019.pdf. 16 Background Note on Model Tenancy Act, Ministry of

Housing and Urban Affairs, 2020,

http://mohua.gov.in/upload/uploadfiles/files/1%20Background%

20Note%20on%20MTA%20(English).pdf. 17 Mission Statement and Guidelines, Atal Mission for

Rejuvenation and Urban Transformation, Ministry of Urban

Development, June 2015,

http://amrut.gov.in/writereaddata/AMRUT%20Guidelines%20.p

df. 18 Mission Statement & Guidelines, Smart Cities, Ministry of

Urban Development, June 2015,

http://smartcities.gov.in/upload/uploadfiles/files/SmartCityGuid

elines(1).pdf. 19 Unstarred Question no. 1526, Ministry of Housing and Urban

Affairs, Lok Sabha, February 12, 2019,

http://164.100.24.220/loksabhaquestions/annex/17/AU1526.pdf. 20 Unstarred Question No. 1020, Ministry of Housing and Urban

Affairs, Rajya Sabha, February 10, 2021,

https://pqars.nic.in/annex/253/AU1020.pdf. 21 “1,789 Cities have been declared ODF conference on PPP

model for waste to energy projects”, Ministry of Housing and

Urban Affairs, Press Information Bureau, November 30, 2017,

http://pib.nic.in/newsite/PrintRelease.aspx?relid=173995. 22 “PM launches Swachh Bharat Abhiyaan”, Prime Minister’s

Office, Press Information Bureau, October 2, 2014,

http://pib.nic.in/newsite/PrintRelease.aspx?relid=110247.


http://164.100.47.193/lsscommittee/Urban%20Development/17_Urban_Development_4.pdf









http://planningcommission.nic.in/sectors/index.php?sectors=National%20Transport%20Development%20Policy%20Committee%20(NTDPC)




https://pmay-urban.gov.in/pmayprogress

https://pmay-urban.gov.in/pmayprogress

https://pmay-urban.gov.in/uploads/progress-pdfs/60227e8146f62-1.pdf

https://pmay-urban.gov.in/uploads/progress-pdfs/60227e8146f62-1.pdf


https://smartnet.niua.org/sites/default/files/resources/report_of_sectoral_group_of_secretaries_on_health_sanitation_urban_development.pdf



http://mohua.gov.in/upload/uploadfiles/files/National_Urban_Rental_Housing_Policy_Draft_2015.pdf

http://mohua.gov.in/upload/uploadfiles/files/National_Urban_Rental_Housing_Policy_Draft_2015.pdf

http://mohua.gov.in/upload/whatsnew/5d25fb70671ebdraft%20Model%20Tenancy%20Act,%202019.pdf.

http://mohua.gov.in/upload/whatsnew/5d25fb70671ebdraft%20Model%20Tenancy%20Act,%202019.pdf.

http://mohua.gov.in/upload/uploadfiles/files/1%20Background%20Note%20on%20MTA%20(English).pdf

http://mohua.gov.in/upload/uploadfiles/files/1%20Background%20Note%20on%20MTA%20(English).pdf

http://amrut.gov.in/writereaddata/AMRUT%20Guidelines%20.pdf

http://amrut.gov.in/writereaddata/AMRUT%20Guidelines%20.pdf

http://smartcities.gov.in/upload/uploadfiles/files/SmartCityGuidelines(1).pdf

http://smartcities.gov.in/upload/uploadfiles/files/SmartCityGuidelines(1).pdf






- 134 -

23. Swachh Bharat Mission (Grameen) Dashboard, Department

of Drinking Water and Sanitation, last accessed on January 18,

2021, https://sbm.gov.in/sbmdashboard/IHHL.aspx. 24 Dashboard, Swachch Bharat Mission (Urban), Ministry of

Housing and Urban Affairs, last accessed on February 13, 2021,

http://swachhbharaturban.gov.in/dashboard/ 25 Swachh Bharat Mission Urban – Financial Progress, Ministry

of Housing and Urban Affairs, last accessed on February 11,

2021,

http://swachhbharaturban.gov.in/writereaddata/financial_progres

s.pdf?id=5mw5jzzbj3sabgx4. 26 “Swachh Bharat Mission (URBAN) 2.0 Announced For Next

5 Years”, Press Information Bureau, Ministry of Housing and

Urban Affairs, February 2, 2021. 27 Swachh Bharat Mission Urban - Dashboard, Ministry of

Housing and Urban Affairs, last accessed on February 11, 2021,

http://swachhbharaturban.gov.in/dashboard/?id=5mw5jzzbj3sab

gx4. 28 “6 Cities rated 5 Star, 65 Cities rated 3 Star and 70 Cities rated

1 Star”, Press Information Bureau, Ministry of Housing and

Urban Affairs, May 19, 2020. 29 Garbage Free City Star Rating, Ministry of Housing and

Urban Affairs, last accessed on February 18, 2021,

http://gfcstarrating.org/User/GFCStarResult. 30 Water Plus Protocol and Toolkit, Swachh Bharat Mission

(Urban), Ministry of Housing and Urban Affairs,

https://sbmurban.org/water-plus. 31 Challenge of Urbanisation, Approach to the 12th five year

plan, Planning Commission, October 2011,

http://planningcommission.gov.in/plans/planrel/12appdrft/appra

och_12plan.pdf. 32 “Report on Indian Infrastructure and Services”, High Powered

Expert Committee for estimating the investment requirement for

urban infrastructure services, March 2011,

http://icrier.org/pdf/FinalReport-hpec.pdf. 33 Press Note on First Advance Estimates of National Income

2020-21, Press Information Bureau, Ministry of Finance,

January 7, 2020,

https://static.pib.gov.in/WriteReadData/userfiles/Presss%20note

%20for%20FAE-2020-21.pdf.

34 “Guidance on use of Municipal Bond Financing for

Infrastructure projects”, Department of Economic Affairs,

Ministry of Finance, September 2017,

https://www.pppinindia.gov.in/documents/20181/33749/Guidan

ce+on+use+of+Municipal+Bonds+for+PPP+projects.pdf/037cb

143-8305-4c57-8f3c-32e5a329297f. 35 “Report of the sub-committee on financing urban

infrastructure in the 12th Plan, Ministry of Urban Development,

March 2012,

http://mohua.gov.in/upload/uploadfiles/files/Report%20of%20th

e%20Sub-

Committee%20on%20Financing%20Urban%20Infrastructure%

20in%20the%2012th%20Plan%20_0.pdf. 36 State of Municipal Finances, Fifteenth Finance Commission,

March, 2019,


StudyReports/State%20of%20Municipal%20Finances%20in%2

0India.pdf. 37 Report of the Steering Committee on Urbanisation, Planning

Commission, Government of India, November 2012,

https://smartnet.niua.org/content/d5ce7e1d-04fd-45c4-af11-

b9e6a25e4ea8. 38 Economic Survey 2018-19, Ministry of Finance, January 29,

2018. 39 Securities and Exchange Board of India (Issue and Listing of

Debt Securities by Municipalities) Regulations, 2015, Securities

and Exchange Board of India, July 15,

2015, http://www.sebi.gov.in/sebi_data/attachdocs/1436964571

729.pdf. 40 Sixth Report, Second Administrative Reforms Commission,

Ministry of Personnel, Public Grievances and Pensions, 2007,

https://darpg.gov.in/sites/default/files/local_governance6.pdf. 41 Report for 2021-21, 15th Finance Commission, February,

2021,


Reports/XVFC%20Complete_Report.pdf.

https://sbm.gov.in/sbmdashboard/IHHL.aspx

http://swachhbharaturban.gov.in/dashboard/

http://swachhbharaturban.gov.in/writereaddata/financial_progress.pdf?id=5mw5jzzbj3sabgx4

http://swachhbharaturban.gov.in/writereaddata/financial_progress.pdf?id=5mw5jzzbj3sabgx4

http://swachhbharaturban.gov.in/dashboard/?id=5mw5jzzbj3sabgx4

http://swachhbharaturban.gov.in/dashboard/?id=5mw5jzzbj3sabgx4

http://gfcstarrating.org/User/GFCStarResult

https://sbmurban.org/water-plus

http://planningcommission.gov.in/plans/planrel/12appdrft/appraoch_12plan.pdf

http://planningcommission.gov.in/plans/planrel/12appdrft/appraoch_12plan.pdf

http://icrier.org/pdf/FinalReport-hpec.pdf

https://static.pib.gov.in/WriteReadData/userfiles/Presss%20note%20for%20FAE-2020-21.pdf

https://static.pib.gov.in/WriteReadData/userfiles/Presss%20note%20for%20FAE-2020-21.pdf

https://www.pppinindia.gov.in/documents/20181/33749/Guidance+on+use+of+Municipal+Bonds+for+PPP+projects.pdf/037cb143-8305-4c57-8f3c-32e5a329297f



http://mohua.gov.in/upload/uploadfiles/files/Report%20of%20the%20Sub-Committee%20on%20Financing%20Urban%20Infrastructure%20in%20the%2012th%20Plan%20_0.pdf




https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/StudyReports/State%20of%20Municipal%20Finances%20in%20India.pdf



https://smartnet.niua.org/content/d5ce7e1d-04fd-45c4-af11-b9e6a25e4ea8

https://smartnet.niua.org/content/d5ce7e1d-04fd-45c4-af11-b9e6a25e4ea8

http://www.sebi.gov.in/sebi_data/attachdocs/1436964571729.pdf

http://www.sebi.gov.in/sebi_data/attachdocs/1436964571729.pdf

https://darpg.gov.in/sites/default/files/local_governance6.pdf



- 135 -

Demand for Grants: Petroleum and

Natural GasThe Ministry of Petroleum and Natural Gas is

concerned with exploration and production of oil

and natural gas, as well as refining, distribution

and marketing, import and export, and

conservation of petroleum products. This note

analyses budgetary allocation of the Ministry, the

share of expenditure on subsidies, and high import

dependence for energy consumption.


The Ministry has been allocated Rs 15,944 crore

in 2021-22. The allocation to the Ministry has

decreased by an annual average rate of 39% over

2019-20. Given the impact due to COVID-19, in

this note, the budget estimates for 2021-22 have

been compared to the actual expenditure for 2019-

20. Table 1 details the main heads of expenditure

for the Ministry.

Table 1: Allocation for the Ministry of

Petroleum and Natural Gas (in Rs crore)

Major Heads

Actual 2019-2020

Revised 2020-21

Budget 2021-22

CAGR 2019-20 to

2021-22

LPG subsidy

34,086 36,072 14,073 -36%

Kerosene subsidy

4,443 2,982 0 -

SPR 120 2,728 396 82%

PDH pipeline

1,552 728 250 -60%

Others 2,611 390 1,224 -32%

Total 42,812 42,901 15,944 -39%

Notes: CAGR is compounded annual growth rate. It gives the

average annual change between any two points of time. SPR =

Strategic Petroleum Reserves. Others includes: (i)

Indradhanush Gas Grid Limited (North-East Natural Gas

Pipeline Grid, (ii) National Seismic Programme, (iii) PM JI-

VAN Yojana, among others.

Sources: Union Budget Documents 2021-22; PRS.

LPG subsidy: The Ministry provides subsidy for

(i) LPG cylinders to beneficiaries under the

PAHAL scheme, and (ii) LPG connections to poor

households under the Pradhan Mantri Ujjwala

Yojana (PMUY), among others.1

In 2021-22, the Ministry is estimated to spend Rs

14,073 crore on LPG subsidy, which is an

annualised decline of 36% than the actual

expenditure in 2019-20. Of this, the allocation for

the PAHAL scheme of Rs 12,480 crore is

estimated to decline by 35% over 2019-20.

There is no allocation for PMUY for 2021-22.

Note that in her Budget speech, Finance Minister

announced expansion of the PMUY scheme to

cover an additional one crore beneficiaries.2

Kerosene subsidy: The Ministry provides

subsidised kerosene through the Public

Distribution System (PDS). In 2021-22, the

Ministry has not allocated any funds for the

kerosene subsidy. In 2020-21, as per the revised

estimates, spending on the kerosene subsidy of Rs

2,982 crore was 33% lower than 2019-20.

Strategic Petroleum Reserves: Strategic

Petroleum Reserves (SPR) are underground

caverns to store excess crude oil. SPRs are

essential to energy security of the country which serves as a cushion during any supply disruptions

in global crude oil.3 In 2021-22, Rs 396 crore has

been allocated towards SPR, an annual average

increase of 82% over 2019-20, but lower than the

spending of Rs 2,728 crore in 2020-21.

PDH Pipeline: The Phulpur-Dhamra-Haldia

(PDH) Pipeline is being developed by GAIL India

to transport natural gas. The project connects five

states to the National Gas Grid. In 2021-22, Rs

250 crore has been allocated for the project, which

is 34% lower than the revised estimate for 2020-21. The allocation for the pipeline was lower in

2020-21 than in 2019-20. The Standing

Committee (2020) noted that this was due to the

scheme coming to an end in 2020-21. 4 The

expenditure allocated was for work already

committed towards the pipeline.

Increase in excise duty on petroleum products

In Budget 2021-22, it was announced that an

Agriculture Infrastructure and Development Cess

of Rs 2.5 per litre on petrol and Rs 4 per litre on

2021-22 Budget speech highlights for Petroleum and Natural Gas2

▪ Pradhan Mantri Ujjwala Yojana to be extended to cover one crore more households.

▪ 100 more districts to be added to the City Gas Distribution network in three years.

▪ Gas pipeline project for Jammu and Kashmir.

▪ Independent Gas Transport System Operator to be set up for facilitation and coordination of open access natural gas pipelines.

▪ Introduction of the Agriculture Infrastructure and Development Cess of Rs 2.5 per litre on petrol and Rs 4 per litre on diesel.

Demand for Grants 2021-22: Petroleum and Natural Gas PRS Legislative Research

- 136 -

diesel would be levied, with equivalent cuts made

to basic excise duty and to special additional

excise duty.2 Table 2 below compares the change

in tax and cess levied on petrol and diesel over the

last four years. The share of cess for both petrol

and diesel has increased sharply in this period.

Table 2: Change in tax and cess (Rs/ litre) Excise Duty (Rs per litre)

Petrol Diesel

Apr 2017 Feb 2021 Apr 2017 Feb 2021 Tax 9.48 1.4 11.33 1.8 Cess 12 31.5 6 30 Total 21.48 32.9 17.33 31.8 Cess as % of Total Duty

56% 96% 35% 94%

Sources: Union Budget documents (multiple years); PRS.

Union excise duty includes (i) tax receipts from

basic excise duty, and (ii) cess receipts from

special additional duty on motor spirit, the Road

and Infrastructure Cess, and the Agriculture

Infrastructure and Development Cess. While the

central government is constitutionally required to

share a part of its tax revenue with states as per the

recommendations of the Finance Commission, it is

not required to share with states the revenue it gets

from cess and surcharge. Thus, an increase in cess with corresponding decrease in excise has the

following effects: (a) there is no impact on the

consumer, and (b) the centre gets higher revenue

with corresponding lower amount going to states.

Impact of crude oil price

Historically, the Ministry’s expenditure has

followed the trend in crude oil prices. Expenditure

was highest in 2012-13 when price of crude oil

was more than $100 per barrel. Price of crude oil has declined since and remained under $70 per

barrel. Between 2011-12 and 2021-22,

expenditure has declined at an annual average rate

of 14%.

Figure 1 compares the trend in expenditure of the

Ministry to the trend in weighted average price of

crude oil for the years 2011-12 to 2019-20.

Figure 1: Expenditure of Ministry (Rs Crore)

Note: Price of crude oil is the price per barrel of the Indian

Basket of crude oil.

Sources: Petroleum Planning and Analysis Cell; Union Budget

2021-22; PRS.

Rise in crude oil prices usually also leads to rise in

under-recoveries. Under-recovery refers to the

difference in the cost of producing petroleum

products, and the price at which they are delivered to consumers. It indicates the loss incurred by oil

marketing companies while supplying these

products. The central government compensates

the oil marketing companies by sharing some of

this incurred loss through a burden sharing

mechanism. Figure 2 shows the trend of under-

recoveries with the price of global crude oil.

In 2020-21, global crude oil prices fell to $20 per

barrel in April and remained under $50 per barrel

till December 2020. In the first half of 2020-21

(April to September), under-recoveries decreased

to zero.

Figure 2: Trend in under-recoveries of oil

companies and global crude oil prices

Sources: Petroleum Planning and Analysis Cell; PRS.

Strategic Petroleum Reserves: The decline in

crude oil price in 2020-21 also enabled the

government to purchase for the Strategic

Petroleum Reserves. In April and May 2020, 16.7

million barrels of crude oil were bought at an

average cost of $19 per barrel. 5 In January 2020,

the price of crude oil was $60 per barrel.

LPG and Kerosene subsidy

Subsidies form the largest component of the

Ministry’s expenditure, with 88% of its total

budget allocated to it. Historically, subsidies have

occupied between 75% to 99% of the budget. The

Ministry (usually) provides subsidies under three

major heads: (i) Direct Benefit Transfer (DBT-

PAHAL scheme), and (ii) Pradhan Mantri Ujjwala

Yojana (PMUY) for LPG, and (iii) kerosene

subsidy (see Table 3).

0

30

60

90

120

-

30,000

60,000

90,000

1,20,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

Expenditure Crude oil price (USD/barrel)

0

30

60

90

120

0

50,000

1,00,000

1,50,000

2,00,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

Under-recoveries (Rs Crore)

Crude Oil Price (USD/barrel)


- 137 -

Table 3: Allocation for subsidy on LPG and

Kerosene (in Rs Crore)

Major Head Actual

2019-20 Revised 2020-21

Budget 2021-22

CAGR 2019-20 to

2021-22

DBT-PAHAL 29,628 25,521 12,480 -35%

PMUY 3,724 9,690 0 -

Kerosene subsidy

4,443 2,982 0 -

Total 37,795 38,193 12,480 -43%


LPG subsidy

For 2021-22, the budget allocation for LPG

subsidy (Rs 14,073 crore) has decreased at an

annual average rate of 36% over 2019-20. In 2020-21, Rs 36,072 crore was spent on the LPG

subsidy as per the revised estimate.

Spending on DBT-PAHAL is estimated to be Rs

12,480 crore. In 2020-21, the budget allocation

for DBT-PAHAL was Rs 35,605 crore while the

revised estimate for spending is Rs 25,521 crore

(decline of 28%). Note that expenditure on

subsidy is dependent on the difference between the

subsidised and non-subsidised price for LPG. The

non-subsidised price is in turn dependent on the

price of crude oil, which fell in 2020 due to the impact of COVID-19.

There is no allocation for PMUY in spite of an

announcement to increase coverage under the

scheme.2 In 2020-21 the budget allocation for

PMUY was Rs 1,118 crore while the revised

estimate was Rs 9,690 crore (767% higher). The

scheme had met its target of providing LPG

connections to 8 crore households in September

2019. The budget allocation for 2020-21 was for

clearance of past dues of the government to oil

marketing companies implementing the PMUY

scheme.4 However, in March 2020, the Finance Minister announced the provision of up to three

free LPG refills for eight crore poor families under

the Pradhan Mantri Garib Kalyan Yojana. 6 The

cost of free refills availed between April to August

2020 was Rs 9,670 crore for 13 crore refills. 7

The remaining allocation under the LPG subsidy is

for: (i) implementation of the Assam Gas Cracker

project (for production of ethylene), and (ii)

subsidy to oil companies for supply of LPG to the

North East.

Kerosene Subsidy

Over the last few years, the Ministry’s expenditure

on providing subsidy for kerosene has reduced

from Rs 7,339 crore in 2015-16, to an estimated

zero in 2021-22 (see Figure 3). The Standing

Committee on Petroleum and Natural Gas (2017)

had recommended that the Ministry should reduce the expenditure on this subsidy and work towards

the eventual withdrawal of the subsidy.8

Figure 3: Trend of expenditure on subsidies

Sources: Union Budget Documents; PRS.

The Standing Committee on Petroleum and Natural Gas (2020) observed that an increase in

the coverage of LPG beneficiaries is necessary to

reduce dependence on kerosene.4 This will result

in the usage of cleaner fuel, and promote the

health of users. However, large segments of the

population are still dependent upon kerosene and

only three states have become kerosene free.4

Figure 4 compares the trend in consumption of

kerosene and LPG.

Figure 4: Consumption of Kerosene and LPG

(in TMT)

Note: TMT is Thousand Metric Tons.


Key issues and analysis

Pradhan Mantri Ujjwala Yojana

The PMUY scheme was launched in May 2016

with the objective of providing LPG connections

to women from below poverty line households

with a support of Rs1,600 per connection.9 The

scheme initially had a target to provide

connections to five crore households, which was

later revised to eight crore households by 2020.10

The ambit of the scheme was also expanded to

cover all SC/ST households, beneficiaries of

Pradhan Mantri Awas Yojana (Gramin), forest

-

10,000

20,000

30,000

40,000

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

LPG Subsidy Kerosene Subsidy

0

5,000

10,000

15,000

20,000

25,000

30,000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

Kerosene consumption LPG consumption


- 138 -

dwellers, backward classes, in addition to

households identified under the Socio Economic

and Caste Census (SECC).10

According to the Ministry, a total of 8.01 crore

PMUY connections have been released as of

January 2021. 11 In 2020, the government

informed the Standing Committee on Petroleum

and Natural Gas that the PMUY scheme would be

closed since the target of 8 crore beneficiaries had

been met.4 The Committee recommended the

scheme be extended to cover poor households

among the general category in urban and semi-

urban slum areas which do not have LPG access.4

According to the National Sample Survey, in 2011-12 more than 67% of the rural households in

the country used firewood as the primary source of

energy for cooking.12 LPG was used by 15% of

households. When the survey was repeated in

2018, share of rural households using firewood

was 45%, while the share LPG was 48%.13

The National Family Health Survey, 2019-20

(NFHS-5) also showed improvement in access to

clean fuel since NFHS-4 which was conducted in

2015-16. So far, NFHS-5 results are only

available for 22 states/UTs. Table 4 compares the percentage of rural households in major states with

access to clean fuel.

Table 4: Rural households with access to clean

fuel (in %)

State NFHS-4 NFHS-5

Andhra Pradesh 50 78

Bihar 11 30

Gujarat 27 41

Karnataka 32 69

Kerala 51 66

Maharashtra 34 65

Telangana 48 88

West Bengal 11 21 Sources: National Family Health Survey-4; National Family

Health Survey-5; PRS.

An assessment report by the Petroleum Planning

and Analysis Cell (2016) pointed out the key

barriers for not applying for LPG connection are:

(i) high initial cost, including security deposit /

price of gas stove, (ii) high recurring cost of the

cylinder, and (iii) easy availability of firewood. 14

Refill of cylinders: The Comptroller and Auditor

General (CAG) submitted a performance audit

report on the PMUY scheme in December 2019.15

The Report raised concerns related to lack of

sustained usage of cylinders released under the

scheme. 75% of consumers opted for a refill

under the scheme and 57% opted for three or more

refills (from date of getting the connection till

December 2018).

The CAG performance audit report noted that the

average annual refill rate for PMUY beneficiaries

is low compared to the refill rate for non-PMUY

beneficiaries (shown in Figure 5). 15

Figure 5: Average annual refill consumption

for PMUY and non-PMUY consumers

Sources: CAG Performance Audit, December 2019; Standing

Committee on Petroleum and Natural Gas (2020); PRS.

The Standing Committee on Petroleum and

Natural Gas (2020) also highlighted the disparity

in the average refill of cylinders for regular LPG

consumers (6.3 cylinders) and the average refill of

cylinders by PMUY beneficiaries (3.2 cylinders).4

It suggested the Ministry should take measures,

including provision of additional monetary

incentives, to encourage PMUY beneficiaries to

use LPG cylinders on a regular basis.

The Ministry noted certain efforts by oil marketing companies to improve refill consumption such as:

(i) increase in LPG distributors to improve last

mile connectivity, and (ii) facility to swap 14.2 kg

(standard) cylinder refill with a 5 kg refill.4

However, till September 2020, only 7.15 lakh

PMUY beneficiaries have swapped the 14.2 kg

refill for the 5 kg refill.16

In March 2020, beneficiaries under PMUY were

allowed up to three free refills to be availed up to

September.17 In the five months between April to

August 2020, 13 crore refills were delivered to

beneficiaries.7 This is nearly half the total refills (28.8 crore) delivered between May 2016 and

December 2018. 18 Note that as of March 2020

there were over 8 crore beneficiaries under

PMUY, whereas as on December 2018, there were

5.9 crore beneficiaries.

Pratyaksha Hastaantarit Laabh (PAHAL)

PAHAL scheme was launched in 2014 (54

districts in first phase) and rolled out to rest of the

country in 2015.19 Under the scheme, a consumer

(with annual income up to Rs 10 lakh) can avail

Direct Benefit Transfer (DBT) cash-subsidy for a

LPG cylinder. The beneficiaries buy LPG

cylinders at market rate and subsequently receive

subsidy directly in their bank accounts. Price of

LPG and the extent of subsidy change every

month. Figure 6 provides the monthly non-

subsidised price of an LPG cylinder and the

7.7 7.5 7.36.7 6.3

3.93.4 3 3.2

0

2

4

6

8

2015-16 2016-17 2017-18 2018-19 2019-20

Non-PMUY PMUY


- 139 -

amount of subsidy per cylinder between April

2016 and February 2021.

In 2020-21, the average price of a non-subsidised

LPG was Rs 636.6 between April 2020 and

February 2021, while the subsidy has been zero

from May 2020 onwards. 20

Figure 6: Non-subsidised price of LPG and

subsidy (in Rs)

Note: Prices are at New Delhi.

Sources: Indian Oil Corporation; Petroleum Planning and

Analysis Cell; PRS.

As of September 2020, there were 26.35 crore

beneficiaries under the PAHAL scheme. 21 The

CAG (2019) noted that the coverage of LPG in the

country has increased from 62% in May 2016 to

94.3% in March 2019.15 As of January 2021, LPG

coverage is 99.5%.11 LPG coverage is defined as

the ratio of active consumers to total households. 15

Dependence on imports

Crude oil and petroleum products

India's import of crude oil has increased from

1,71,729 TMT (Thousand Metric Tons) in 2011-

12 to 2,26,955 TMT in 2019-20, at an average

annual growth rate of 4%.22 Crude oil is refined in

oil refineries to transform oil into useful petroleum

products such as high speed diesel, LPG and

kerosene. These petroleum products are used as

raw materials in various sectors and industries such as transport (fuel) and petrochemicals.

Further, they may also be used in factories to

operate machinery or fuel generator sets.

India exports petroleum products to countries such

as Singapore, the Netherlands, and the United

Arab Emirates. 23 In 2019-20, India's total export

of petroleum products was 65,685 TMT.

Further, India’s production of crude oil and

condensate has fallen from 38,082 TMT in 2011-

12 to 32,169 TMT in 2019-20, an annual average

decline of 2%.22 Production as a percentage of

imports of crude oil declined from 22% to 14%

during this period. The Ministry attributed the

decline to the natural ageing of oil fields. 24

Table 5 shows the total import of crude oil and

petroleum products, consumption of petroleum

products in the country and India's exports of

petroleum products for the last 10 years. India’s

net import (total imports - exports) as a fraction of

consumption has risen from 86% in 2011-12 to

95% in 2020-21.

Table 5: Import, export and consumption of

petroleum products in the country (in TMT)

Year Crude

Oil imports

Petroleum products

import

Petroleum products

export

Petroleum products

consumption

2011-12 1,71,729 15,849 60,837 1,48,132

2012-13 1,84,795 16,354 63,408 1,57,057

2013-14 1,89,238 16,697 67,864 1,58,407

2014-15 1,89,435 21,301 63,932 1,65,520

2015-16 2,02,850 29,456 60,539 1,84,674

2016-17 2,13,932 36,287 65,513 1,94,597

2017-18 2,20,433 35,461 66,833 2,06,166

2018-19 2,26,498 33,348 61,096 2,13,216

2019-20 2,26,955 43,788 65,685 2,14,127

2020-21* 1,43,232 32,050 42,108 1,40,617

Note: *Data for 2020-21 is till December 2020.


The Standing Committee on Petroleum and

Natural Gas (2019) noted that the Middle East

accounts for more than two-thirds of India’s crude

oil imports, and urged the government to continue its crude oil import diversification efforts. 25

Natural Gas

Total imports of natural gas as a percentage of

consumption (production plus import) has risen

from 28% in 2011-12 to 53% in 2019-20. Figure

7 shows the total production and imports of

natural gas, and the share of imports in the total.

Figure 7: Production and Imports of Natural

Gas (in MMSCM)

Notes: MMSCM = Million Metric Standard Cubic Meters.

Data for 2020-21 is till December 2020.


0

200

400

600

800

1000

Apr

-16

Aug

-16

Dec

-16

Apr

-17

Aug

-17

Dec

-17

Apr

-18

Aug

-18

Dec

-18

Apr

-19

Aug

-19

Dec

-19

Apr

-20

Aug

-20

Dec

-20

Non-subsidised price per cylinder

Subsidy per cylinder

0%

20%

40%

60%

80%

100%

0

10000

20000

30000

40000

50000

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Production Import Import % of Total


- 140 -

Between 2011-12 and 2019-20, import of natural

gas increased from 17,997 MMSCM (Million

Metric Standard Cubic Meters) to 33,867

MMSCM, at an average rate of 8%. Whereas the

production of natural gas has fallen from 46,453

MMSCM to 30,257 MMSCM.

In 2015, the Prime Minister had envisioned

reduction in import in the energy sector (oil, gas,

and petroleum products) from 77% to 67% by

2021-22. 26 The Standing Committee on

Petroleum and Natural Gas (2018) had noted that

it does not find any concrete action taken by the

ministry and a clear strategy with stipulated

timelines to achieve this target.27

Increase in share of natural gas in energy mix

The Report of the Roadmap for Reduction in

Import Dependency in the Hydrocarbon Sector by

2030 (2014) had called from an increase in share

of natural gas in the energy consumption mix from

10% to at least 20% to 25% by 2025. 28 A

necessary precondition to achieve this is to

increase the gas pipeline infrastructure. In 2012,

India had 13,000 km of natural gas transmission

pipeline. As of September 2020, the total

authorised length of natural gas pipelines is 32,559

km of which 15,543 km is under construction.29

Budget 2020-21 and 2021-22 contained

announcements to increase the use of natural gas

including: (i) expansion of the national gas grid

from 16,200 km to 27,000 km (Budget 2020-21),

1 About the Scheme, PAHAL – Direct Benefits Transfer for

LPG, Ministry of Petroleum and Natural Gas,

http://petroleum.nic.in/dbt/whatisdbtl.html. 2 Budget speech, Budget 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 3 About ISPRL, Indian Strategic Petroleum Reserves Limited,

http://www.isprlindia.com/aboutus.asp. 4 2nd Report of the Standing Committee on Petroleum and

Natural Gas on the Demands for Grants (2020-21), March

2020,

http://164.100.47.193/lsscommittee/Petroleum%20&%20Natur

al%20Gas/17_Petroleum_And_Natural_Gas_2.pdf. 5 Unstarred Question No. 180, Lok Sabha, Ministry of

Petroleum and Natural Gas, Answered on September 14, 2020,


. 6 “Finance Minister announces Rs 1.70 Lakh Crore relief

package under Pradhan Mantri Garib Kalyan Yojana for the

poor to help them fight the battle against Corona Virus”, Press

Information Bureau, Ministry of Finance, March 26, 2020. 7 Unstarred Question No. 459, Rajya Sabha, Ministry of


https://pqars.nic.in/annex/252/AU459.pdf. 8 18th Report of the Standing Committee on Petroleum and

Natural Gas on the Demands for Grants (2017-18), March

2017,


al%20Gas/16_Petroleum_And_Natural_Gas_18.pdf. 9 About PMUY, Pradhan Mantri Ujjwala Yojana, Ministry of

Petroleum and Natural Gas,

https://www.pmujjwalayojana.com.

(ii) addition of 100 districts to the city gas

distribution network, and (iii) setting up an

independent gas transport system operator to

facilitate booking of common carrier capacity in

natural gas pipelines.30,2

Natural gas pipeline is a mode of bulk

transportation and is a natural monopoly since it is

impractical to have multiple pipelines in the same

route. Common carrier arrangements allow the

pipeline to be utilised by any entity on a non-

discriminatory basis which leads to competition in

the natural gas market. This is currently regulated

by the Petroleum and Natural Gas Regulatory

Board.31

Promotion of alternate fuels

The strategy of import reduction includes

increasing production of domestic petroleum and

natural gas, and promoting alternate fuels.4 The

Pradhan Mantri Jaiv Indhan-Vatavaran Anukul

Fasal Awashesh Nivaran (PM JI-VAN) Yojana

was launched in 2019 to provide financial support

for setting up bio-ethanol projects using biomass

and other renewable feedstock. 32 The scheme has

been allocated Rs 233 crore for 2021-22. Note

that in 2019-20, the government did not spend any part of the budgeted allocation of Rs 38 crore, and

in 2020-21, Rs 32 crore was spent (60% of the

budget allocation). The Standing Committee

(2020) observed that this scheme could help

reduce import dependence by substituting fossil

fuels with bio-fuels.4

10 ‘Cabinet approves enhancement of target under Pradhan

Mantri Ujjwala Yojana’, Press Information Bureau, Cabinet

Committee on Economic Affairs, February 7, 2018. 11 Unstarred Question No. 936, Lok Sabha, Ministry of

Petroleum and Natural Gas, Answered on February 8, 2021,


. 12 Energy Sources of Indian Households for Cooking and

Lighting, 2011-12, NSS 68th Round, July 2011-June 2012,

Ministry of Statistics and Programme Implementation,

http://mospi.nic.in/sites/default/files/publication_reports/nss_re

port_567.pdf. 13 Drinking Water Sanitation, Hygiene and Housing Condition

in India, NSS 76th Round, July 2018-December 2018, Ministry

of Statistics and Programme Implementation,

http://mospi.nic.in/sites/default/files/NSS7612dws/Report_584

_final.pdf. 14 Assessment report: Primary survey on household cooking

fuel usage and willingness to convert to LPG, Petroleum

Planning & Analysis Cell, Ministry of Petroleum and Natural

Gas, June 2016,

http://ppac.org.in/WriteReadData/Reports/2017103104493425

12219PrimarySurveyReportPPAC.pdf. 15 Report of the Comptroller and Auditor General of India on

Pradhan Mantri Ujjwala Yojana, Performance Audit, No. 14 of

2019, Ministry of Petroleum and Natural Gas, December 11,

2019,

https://cag.gov.in/sites/default/files/audit_report_files/Report_

No_14_of_2019_Performance_Audit_of_Pradhan_Mantri_Ujj

wala_Yojana_Ministry_of_Petroleum_and_Natural_Gas_0.pdf.

http://petroleum.nic.in/dbt/whatisdbtl.html


http://www.isprlindia.com/aboutus.asp

http://164.100.47.193/lsscommittee/Petroleum%20&%20Natural%20Gas/17_Petroleum_And_Natural_Gas_2.pdf







https://www.pmujjwalayojana.com/



http://mospi.nic.in/sites/default/files/publication_reports/nss_report_567.pdf

http://mospi.nic.in/sites/default/files/publication_reports/nss_report_567.pdf

http://mospi.nic.in/sites/default/files/NSS7612dws/Report_584_final.pdf

http://mospi.nic.in/sites/default/files/NSS7612dws/Report_584_final.pdf

http://ppac.org.in/WriteReadData/Reports/201710310449342512219PrimarySurveyReportPPAC.pdf

http://ppac.org.in/WriteReadData/Reports/201710310449342512219PrimarySurveyReportPPAC.pdf

https://cag.gov.in/sites/default/files/audit_report_files/Report_No_14_of_2019_Performance_Audit_of_Pradhan_Mantri_Ujjwala_Yojana_Ministry_of_Petroleum_and_Natural_Gas_0.pdf




- 141 -

16 Unstarred Question No. 1248, Rajya Sabha, Ministry of


https://pqars.nic.in/annex/252/AU1248.pdf. 17 ‘Cabinet approves extension of time limit for availing the

benefits of "Pradhan Mantri Garib Kalyan Yojana" for Ujjwala

beneficiaries by three months w.e.f. 01.07.2020’, Press

Information Bureau, Ministry of Petroleum and Natural Gas,

July 8, 2020. 18 Refill Data, Pradhan Mantri Ujjwala Yojana, accessed on

February 6, 2020, https://pmuy.gov.in/registereduser.html. 19 PAHAL-Direct Benefits Transfer for LPG(DBTL)

Consumers Scheme, Ministry of Petroleum and Natural Gas,

http://petroleum.nic.in/dbt/whatisdbtl.html. 20 Petroleum Price and Under-Recoveries, Petroleum Planning

and Analysis Cell,

https://www.ppac.gov.in/WriteReadData/userfiles/file/PP_7_b_

PS_oil_prices(H).pdf. 21 Direct Benefit Transfer portal,

https://dbtbharat.gov.in/data/documents/Schemes%20wise%20

Beneficiaries%20reported%20on%20DBT%20Bharat%202020

-21%20as%20on%2015.09.2020.pdf. 22 Petroleum Planning and Analysis Cell. 23 Export Import Data Bank, Ministry of Commerce and

Industry. 24 Unstarred Question No. 1140, Lok Sabha, Ministry of

Petroleum and Natural Gas, Answered on February 8, 2021,

http://164.100.24.220/loksabhaquestions/annex/175/AU1140.p

df. 25 1st Report of the Standing Committee on Petroleum and

Natural Gas on the Demands for Grants (2019-20), December

2019,


al%20Gas/17_Petroleum_And_Natural_Gas_1.pdf. 26 Unstarred Question No. 2524, Lok Sabha, Ministry of

Petroleum and Natural Gas, Answered on August 1, 2016,

http://164.100.24.220/loksabhaquestions/annex/9/AU2524.pdf. 27 25th Report of the Standing Committee on Petroleum and

Natural Gas, August 2018,


al%20Gas/16_Petroleum_And_Natural_Gas_25.pdf. 28 Report of the Roadmap for Reduction in Import Dependency

in the Hydrocarbon Sector by 2030, Ministry of Petroleum and

Natural Gas, September 2014,

https://www.pngrb.gov.in/OurRegulation/NGP-GSR273.html. 29 Natural Gas Pipelines Network in India- As on 30.09.2020,

Petroleum and Natural Gas Regulatory Board of India,

https://www.pngrb.gov.in/data-

bank/NGPLReports30092020.pdf . 30 Budget speech, Union Budget 2020-21,


21/doc/Budget_Speech.pdf. 31 Petroleum and Natural Gas Regulatory Board (Guiding

Principles for Declaring or Authorizing Natural Gas Pipeline as

Common Carrier or Contract Carrier) Regulations, 2009,

Petroleum and Natural Gas Regulatory Board of India, April

21, 2009, https://www.pngrb.gov.in/OurRegulation/NGP-

GSR273.html. 32 ‘Cabinet approves Pradhan Mantri JI-VAN Yojana’, Press

Information Bureau, Cabinet Committee on Economic Affairs,

February 28, 2019.


https://pmuy.gov.in/registereduser.html

http://petroleum.nic.in/dbt/whatisdbtl.html

https://www.ppac.gov.in/WriteReadData/userfiles/file/PP_7_b_PS_oil_prices(H).pdf

https://www.ppac.gov.in/WriteReadData/userfiles/file/PP_7_b_PS_oil_prices(H).pdf

https://dbtbharat.gov.in/data/documents/Schemes%20wise%20Beneficiaries%20reported%20on%20DBT%20Bharat%202020-21%20as%20on%2015.09.2020.pdf










https://www.pngrb.gov.in/OurRegulation/NGP-GSR273.html

https://www.pngrb.gov.in/data-bank/NGPLReports30092020.pdf

https://www.pngrb.gov.in/data-bank/NGPLReports30092020.pdf

https://www.indiabudget.gov.in/budget2020-21/doc/Budget_Speech.pdf

https://www.indiabudget.gov.in/budget2020-21/doc/Budget_Speech.pdf



- 142 -

Demand for Grants: Science and

Technology

The Ministry of Science and Technology has three

departments: (i) Department of Science and

Technology (DST), (ii) Department of Scientific and

Industrial Research (DSIR), and (iii) Department of

Biotechnology (DBT). DST is responsible for

promoting new areas of science and technology,

coordinating, and integrating areas of science and

technology having cross-sectoral linkages. It formulates and implements policies for the promotion

of science, technology, research, and innovation in

the country. DSIR is responsible for promotion,

development, and transfer of indigenous technology.

The Council for Scientific and Industrial Research

(CSIR) is an autonomous body under DSIR which

undertakes research and development in diverse

areas. DBT is entrusted with the promotion and

development of biotechnology. This note examines

the expenditure by the three Departments and

discusses key issues in the sector.

Overview of Finances1,2,3

Expenditure

In 2021-22, the Ministry of Science and Technology

has been allocated Rs 14,794 crore. This comprises:

(i) Rs 6,067 crore to DST (41%), (ii) Rs 5,224 crore

to DSIR (35%), and (iii) Rs 3,502 crore to DBT

(24%). This is an annual increase of 8% over 2019-

20. Allocation to DBT (22% annual increase over

2019-20) has increased at a higher rate as compared

to DST (6%) and DSIR (4%).

Table 1: Overview of Allocation (in Rs crore)

Dept 2019-20 2020- 21 BE

2020-21 RE

% change in 20-21 (BE to

RE)

2021-22 BE

CAGR (19-20

to 21-22)

DST 5,407 6,302 5,000 -21% 6,067 6%

DSIR 4,872 5,385 4,252 -21% 5,224 4%

DBT 2,359 2,787 2,300 -17% 3,502 22%

Total 12,637 14,473 11,552 -20% 14,794 8% Note: BE: Budget Estimates; RE: Revised Estimates. CAGR:

Compounded Annual Growth Rate. Source: Expenditure Budget; PRS.

Almost all the expenditure under the Ministry is

revenue expenditure (99.7% on average). In 2020-21,

all three departments have seen a notable cut in the

allocation at the revised stage as compared to the

budget estimate (20% on aggregate). In comparison,

the overall revenue expenditure of the central government in 2020-21 increased by 14.5% from the

budget stage to the revised stage. However, note that

there have been significant variations in the allocation

to individual ministries in 2020-21 at the revised

stage. This may be due to a change in expenditure

priorities during the year due to COVID-19 and

national lockdown. In 2020-21, the amount allocated

at the budget stage to the DSIR was about Rs 1,000

crore less than the initial demand by the department.4

While examining this allocation, the Standing

Committee on Technology (2020) had suggested that

an additional amount of Rs 440 crore should be allocated to the DSIR at the revised stage.4 This was

to be utilised for meeting its bare minimum expenses

on the fellowship to researchers and salary to the

staffs of the department, and certain schemes.4

However, as mentioned earlier, in 2020-21, allocation

to DSIR has further reduced by Rs 1,133 crore at the

revised stage.

Growth in Expenditure

The growth in the expenditure of the Ministry has

been variable during the last decade (Figure 1 and 2).

The year-on-year growth in expenditure was

relatively higher during the 2015-18 period. During

the 2018-21 period, the growth has slowed down. In

2018-19, the expenditure by the Ministry was only

3% higher than the previous year. In 2018-19, actual

expenditure by DSIR registered a negative growth as

compared to the previous year (-2%). Similarly,

expenditure by DBT in 2019-20 was 1% less than the

previous year. In 2020-21, all three departments are

estimated to register a decline in expenditure as

compared to the previous year. During the 2015-20

period, the compounded annual growth rate in expenditure is: (i) 9% for DST, (ii) 5% for DSIR, and

(iii) 11% for DBT.

Figure 1: Year-on-year growth in expenditure-

Ministry of Science and Technology

Note: Expenditure for 2020-21 is as per revised estimates.

Source: Expenditure Budget; PRS.

Regarding the expenditure of DST, the Standing

Committee on Science and Technology (2020) had

14%

8%

-3%

5%

8%

21%

10%

13%

3%

7%

-9%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

Demand for Grants 2021-22 Analysis: Science and Technology PRS Legislative Research

- 143 -

observed that there is a need for enhancement in the

medium-term expenditure framework (MTEF)

allocation to the DST.5 MTEF provides a three-year

rolling target for the expenditure of a department.6

The Committee recommended that DST should

pursue the Ministry of Finance for revision of the

MTEF to a higher base level. This will help DST in

carrying out its new initiatives and future plans.5

Figure 2: Department-wise year-on-year growth in

expenditure

Note: Expenditure for 2020-21 is as per revised estimates.


Fund Utilisation

During the 2016-20 period (four years), on average,

DST spent 4% less than the budget estimates (Figure

3). The corresponding figures for DSIR and DBT are

1% and 2%, respectively. In 2019-20, DBT spent 9%

less than the budget estimates.

Figure 3: Underutilisation


Major allocation heads

Department of Science and Technology (DST)


towards Assistance to Autonomous Bodies (Table 2).

Allocation towards Autonomous Bodies is the highest

within the Department (25%), followed by allocation

towards Institutional and Human Capacity Building

(18%), and Innovation, Technology Development and

Deployment (16%). The Innovation, Technology

Development and Deployment head includes

allocation for technology development programme,

programmes for socio-economic development, and

drugs and pharmaceutical research. About 16% of

the total allocation in 2021-22 is towards Statutory

and Regulatory Bodies (fourth-highest). Allocation

towards these bodies in 2021-22 is estimated to

decrease at CAGR of 5% over 2019-20.

In 2020-21, allocation towards the Department is

estimated to decrease by 21% from the budget stage

to the revised stage. Within the Department, heads

that have seen a higher cut at the revised stage

include: (i) Research and Development (44%), and

(ii) Innovation, Technology Development, and

Deployment (38%), and (iii) Statutory and Regulatory

Bodies (32%). Research and Development head

includes allocation for international cooperation,

mega facilities for basic research, technology fusion,

and applications research.

Table 2: Major Allocation Heads-DST (in Rs

crore)

Particular 19-20

Actuals 20-21

RE 21-22

BE

CAGR (19-20 to

21-22)

Assistance to Autonomous Bodies

1,218 1,375 1,488 11%

Institutional & Human Capacity Building

1,069 911 1,100 1%

Innovation, Technology Development & Deployment

812 656 952 8%

Statutory & Regulatory Bodies of which

1,055 752 950 -5%

(i) SERB 957 742 900 -3%

(ii) TDB 98 10 50 -29%

Research and Development

584 403 594 1%

Survey of India 434 444 531 11%

Mission on ICPS 123 271 270 48%

Total 5,407 5,000 6,067 6%

Note: SERB: Science and Engineering Research Board; TDB:

Technology Development Board; ICPS: Interdisciplinary Cyber

Physical Systems. RE: Revised Estimates; BE: Budget Estimates.


Department of Scientific and Industrial Research

In 2021-22, almost 98% of the total allocation under

DSIR is towards the Council of Scientific and

Industrial Research (CSIR). In 2020-21, the

allocation to the National Laboratories under CSIR is

estimated to decrease by 22% at the revised stage.

Table 3: Major Allocation Heads-DSIR (in Rs crore)

Particular 19-20 20-21

RE 21-22

BE

CAGR (19-20 to 21-

22)

CSIR of which 4,832 4,208 5,144 3%

(i) National Laboratories

4,532 3,808 4,669 2%

(ii) Capacity Building and Human Resource Development

300 400 475 26%

Industrial Research and Development

7 13 21 75%

Total 4,872 4,252 5,224 4% Note: RE: Revised Estimates; BE: Budget Estimates.


-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

DST DSIR DBT

-6%-5% -4% -3%

-1%

4%

-5%

0%

4%

0%

-1%

-9%-10%

-5%

0%

5%

2016-17 2017-18 2018-19 2019-20

DST DSIR DBT


- 144 -

Although, allocation towards the Industrial Research

and Development head was small (Rs 31 crore at the

budget stage in 2020-21), this was cut to Rs 13 crore

at the revised stage (by 59%). Expenditure under this

head include schemes for: (i) promoting innovations

through individual, startups, and small scale

industries, (ii) patent acquisition, and (iii) research

facilities.

Department of Biotechnology (DBT)

In 2021-22, the highest allocation within this

Department is towards Biotechnology Research and

Development (Rs 1,660 crore, 47% of the total). This

is followed by allocation towards Industrial and

Entrepreneurship Development (27%) and Assistance to Autonomous Institutions (23%). Allocation

towards Industrial and Entrepreneurship

Development in 2021-22 is about four times the

actual allocation in 2019-20. Under the Industrial and

Entrepreneurship Development, assistance is given

for public-private partnership programmes, bio-

clusters, and biotech parks. In 2020-21, a higher cut

is estimated in the allocation to Research and

Development (16%) and Assistance to Autonomous

Institutions (29%) at the revised stage.

Table 4: Major Allocation Heads- Department of Biotechnology (in Rs crore)

Particular 19-20 20-21

RE 21-22

BE

CAGR (19-20 to

21-22)

Biotechnology Research and Development

1,305 1,323 1,660 13%

Industrial and Entrepreneurship Development

231 344 960 104%

Assistance to Autonomous Institutions

762 577 807 3%

Total 2,359 2,300 3,502 22%



For the majority of the allocation heads across all

three departments, fund utilisation was above 90%

during the 2016-20 period. Following are some heads

with lower fund utilisation during this period:

Research and Development under DST

Under this head, funds are allocated towards: (i)

international co-operation, (ii) National Mission for

Nano Science & Nano Technology, (iii) Mega

Facilities for Basic Research, (iv) alliance and R&D

mission (climate change program), (v) super-

computing facility and capacity building, and (vi)

technology fusion and applications research.

Expenditure under this head at Rs 594 crore

comprises 10% of the total expenditure of the

department in 2021-22. During 2016-20 period, on

average, the actual expenditure was 15% less than the

budget estimate.

Figure 4: Underutilisation - Research and

Development head under DST


Industrial Research and Development under DSIR

Under this head, funds are allocated towards: (i)

Promoting Innovations in Individuals, Startups &

MSMEs (PRISM), (ii) Patent Acquisition and

Collaborative Research & Technology Development

(PACE), (iii) Building Industrial R&D and Common

Research Facilities (BIRD) and (iv) Access to

Knowledge for Technology Development &

Dissemination (A2K plus) programmes of the

Department. Expenditure under this head at Rs 21

crore comprises less than 1% of the total expenditure

under DSIR in 2021-22. The actual expenditure

under this head has been substantially lower than the

budget estimates in all four years between 2016-17

and 2019-20 (49% on average).

Figure 5: Underutilisation - Industrial Research

and Development head under DSIR


Issues for consideration

National expenditure on research and

development at its lowest level since 2004-05

The Science, Technology, and Innovation Policy,

2013 had observed that increasing gross expenditure

in research and development (GERD) to 2% of GDP

has been a national goal for quite some time.7 This

Policy is administered by the Ministry of Science and

Technology. GERD includes expenditure on research

and development by business enterprises, higher

education institutions, governments, and private non-

profit organisations. The 2013 Policy had observed that the target for GERD could be achieved by 2018-

19 if the private sector at least matches the

expenditure level of the public sector.7 However, as

can be seen in Figure 6, the GERD in 2018-19 was

estimated to be 0.65% of GDP.8 Between 2004-05

and 2018-19, GERD reached its highest in 2008-09.

However, since then, GERD in terms of % of GDP

has been declining. GERD in 2018-19 was the lowest

since 2004-05.

-15% -16%-23%

-4%

-30%

-20%

-10%

0%

2016-17 2017-18 2018-19 2019-20

-37%-49%

-32%

-76%-80%

-60%

-40%

-20%

0%

2016-17 2017-18 2018-19 2019-20


- 145 -

Figure 6: Gross Expenditure on Research and

Development (Figures in % of GDP)

Source: Research and Development Statistics 2019-20; Ministry of

Science and Technology; PRS.

Contribution of the private sector

The 2013 Policy had stressed that the expenditure on

research and development (R&D) by the private

sector needs to go up. It had observed that an

increase in private investment is necessary for

translating R&D outputs into commercial outcomes.

However, the expenditure on R&D by the private

sector has decreased from 0.27% of GDP in 2012-13

to 0.24% of GDP in 2018-19 (Figure 7). NITI Aayog

(2018) noted that low investment by the private sector

in R&D is a key challenge in the development of the

innovation ecosystem in the country.9 Note that the Draft Science, Technology, and Innovation Policy,

2020 seeks to double the GERD and the private sector

contribution to GERD in five years.10 Since October

2019, companies have been allowed to use corporate

social responsibility funds (CSR) for contributions

towards research.11 They can spend CSR funds as

contributions to public-funded incubators, research

organisations and universities engaged in research in

science, technology, engineering, and medicine.

Figure 7: Expenditure by the Private Sector on

R&D (Figures in % of GDP)



Contribution of public sector

The 2013 Policy had observed that the public sector

has led the expenditure on R&D in the country. This

includes expenditure by: (i) all central government

ministries, (ii) public sector units, (iii) state

governments, and (iv) higher education institutes.

Expenditure by the public sector has also been

declining since 2008-09 (Figure 8). In 2018-19,

expenditure by the public sector towards R&D in the

country (0.41% of GDP) was the lowest since 2004-

05.

Figure 8: Expenditure by the Public Sector on

R&D (Figures in % of GDP)



Further, the public sector industries (such as National

Thermal Power Corporation Limited (NTPC) and

Steel Authority of India Limited (SAIL)) spend a

lesser portion of their sales turnover on R&D as

compared to the private sector industries (Figure 9).

In 2017-18, private sector companies spent 1.48% of

their sales turnover on R&D. The corresponding

percentage for the public sector industries was 0.29%.

Figure 9: Percentage of sales turnover spent on

R&D (Figures in %)

Note: Data for public sector refers to 103 industrial R&D units.

Data for private sector refers to 2,007 industrial R&D units

excluding scientific and industrial research organisations. The

public sector contributed 48% of the total sales turnover of the

considered units in 2017-18.



International Comparison

If we compare globally, as of 2017, India’s GERD

was substantially lower than countries such as

Germany, USA, China, South Africa, and Brazil

(Figure 10).12 However, India’s GERD is higher than

the average for lower-middle-income group

countries.12

0.74 0.

81

0.80

0.79 0.84

0.82

0.77

0.76

0.74

0.71

0.70

0.69

0.67

0.67

0.65

0.00

0.20

0.40

0.60

0.80

1.0020

04-0

5

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

0.19 0.

23 0.24 0.26

0.26

0.24 0.25 0.27

0.27

0.27

0.26

0.26

0.25

0.24

0.24

0.00

0.10

0.20

0.30

0.40

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

0.56 0.58

0.55

0.53 0.

59

0.58

0.52

0.49

0.47

0.43

0.44

0.43

0.42

0.42

0.41

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

0.30 0.29 0.29

1.47 1.50 1.48

0

1

2

2015-16 2016-17 2017-18

Public Sector Industries Private Sector Industries


- 146 -

Figure 10: Gross Expenditure on Research and

Development in 2017 (Figures in % of GDP)

Source: World Bank; PRS.

The Economic Survey (2017-18) had observed that:

▪ In countries such as the USA, China, Germany,

and Japan, the share of the private sector in the

overall spending in research and development is

significantly higher (Figure 11).13

Figure 11: Source-wise funds for research and

development in 2015

Source: Volume I, Economic Survey 2017-18; PRS.

▪ In most countries, the private sector carries out

the bulk of research and development even if the

government plays an important role in funding.

However, in India, the government is the primary

source as well as the primary user of funds for

R&D.13 The Standing Committee on Science and

Technology (2020) had recommended that the

Department of Science and Technology should

consider a higher direct allocation to the private

sector from its funds for R&D related activities.5

▪ The Economic Survey (2017-18) observed that

the government expenditure on R&D is

undertaken almost entirely by the central

government. There is a need for greater state

government spending (Figure 12).13

Figure 12: Sector-wise source of funds for

R&D in 2018-19

Note: Central sector includes expenditure by central

ministries and central public sector units. State sector

includes spending by the state ministries/organisations and

state agricultural universities. Examples of Higher Education

Institutes are IITs and Indian Institute of Science, Bangalore.

Source: Research and Development Statistics 2019-20;

Ministry of Science and Technology; PRS.

▪ The Survey took note of an analysis by a private

organisation (Forbes, 2017). According to this

analysis, India had 26 firms in the list of top

2,500 global R&D spenders as compared to 301

Chinese companies. 19 of these 26 firms were in

three sectors: (i) pharmaceuticals, (ii)

automobiles, and (iii) software. India had no

firms in five of the top ten R&D sectors as

opposed to China, which has a presence in each

one of them.13

▪ The Survey observed that in several countries,

universities play a critical role in both creating

the talent pool for research as well as generating

high-quality research output. However, publicly

funded research in India is concentrated in

specialised research institutes under different

government departments.13 This leaves

universities to largely play a teaching role.

Hence, universities play a relatively small role in

research activities. The Economic Survey recommended linking national laboratories to

universities for improvement in the knowledge

ecosystem.13

Share in global scientific publications increased

but target set in the 2013 Policy likely to be missed

The Economic Survey (2017-18) noted that looking at scientific publications can help in assessing the

productivity and quality of research.13 The Science,

Technology, and Innovation Policy 2013 observed

that India’s share in the global scientific publications

had increased from 1.8% in 2001 to 3.5% in 2011.7

The Policy had set a target of doubling the global

share in the scientific publications by 2020.13 By

2016, India increased its share in the global scientific

publication to 4.1% (latest data available).8 The

compounded annual growth rate (CAGR) for

scientific publications during the 2011-2016 period

for India has been 6.4% as against the CAGR of 3.7%

for the world.8 If the publication output were to grow

at the same rate, India’s share in 2020 will be about

4.5%. This will be lower than the target set by the

3.04

2.82

2.15

1.26

1.11

0.67

0.58

1.39

2.51

0 1 2 3 4

Germany

USA

China

Brazil

Russia

India

Lower middle income

Middle income

OECD countries

0%

20%

40%

60%

80%

100%

USA China IndiaGovernment Business Universities Private Not for Profit

Central, 50%

Private, 37%

Higher EducationInstitutes,

7%

State, 6%


- 147 -

2013 Policy for 2020 (7% share in the global

scientific publications).

Figure 13: Share in Global Scientific Publication

(SCI Database)

Note: Data is as per the Science Citation Index (SCI) Database.



The Economic Survey (2017-18) also observed that in addition to increasing publications, India needs to

improve in terms of high-quality research output

(measured as highly cited articles).13 It noted that

India lags considerably on this parameter when

compared to other large countries such as USA and

China.13

Low number of researchers per million people

India has a significantly low number of researchers

per million people (253 in 2018) when compared to

countries such as USA and China.14 It is also less

than the average for lower-middle-income group

countries (288 in 2015).14 In comparison, USA and

China had 4,412 (2017) and 1,306 (2018) researchers

per million people.14 The Economic survey (2020-

21) observed that among the top 10 economies, the

government’s contribution to total R&D personnel

and researchers was the highest in India.15 Against an

average of 9%, the government’s contribution to total

R&D personnel and researchers in India was 36% and

34%, respectively.15 Among the top 10 economies,

the contribution of the business sector in R&D

personnel and researchers was the second-lowest in

India.15 Against an average of above 50%, the business sector’s contribution to R&D personnel and

researchers in India was 30% and 34%,

respectively.15

Figure 14: Researchers per million people

Note: Data belongs to different years. For Germany, China, Russia,

and India, the data is as of 2018. For USA, South Africa, and OECD

countries, the data is as of 2017. For middle-income, and lower-

middle-income countries, the data is as of 2015.

Source: World Bank; PRS.

Note that India’s gross enrolment ratio (GER) in

higher education itself is low as compared to these

countries. In 2018, India’s GER in higher education

was 26.3%.17 In comparison, the GER in higher

education in countries such as USA, China, and

Germany was 88%, 49%, and 70%, respectively.18

The National Education Policy 2020 recommends

increasing GER in higher education to 50% by

2035.17 The Economic Survey (2017-18) observed that considerable improvement in mathematics and

cognitive skills is required at the primary and

secondary education level to enable the R&D

ecosystem in the country.13 The National Education

Policy 2020 also aims to improve foundational

literacy and numeracy and cognitive capacities of

students.17

NITI Aayog (2018) had observed that the link

between research, higher education, and the industry

is weak and nascent in India.9 It further observed that

so far the education system has not focussed on cultivating scientific temperament at an early age.9

Even in the later stages, the lack of career

opportunities in basic sciences leads to the diversion

of potential researchers to other rewarding sectors.9 It

had recommended that once the Higher Education

Commission is set up, the Commission may consider

giving credits for innovation and startups.9 The

Commission should also consider setting up online

entrepreneurial development courses in colleges and

universities.9 The Higher Education Commission is

proposed to replace the existing regulatory

institutions for higher education.

3.6% 3.6% 3.8% 4.0% 4.0% 4.1%

0%

2%

4%

6%

8%

2011 2012 2013 2014 2015 2016

5,2124,412

2,7841,307

518253288

7364,079

0

1,0

00

2,0

00

3,0

00

4,0

00

5,0

00

6,0

00

GermanyUnited States

RussiaChina

South AfricaIndia

Lower Middle IncomeMiddle Income

OECD Countries

India’s performance on the Global Innovation Index

The Economic Survey (2020-21) observed that:

▪ Since the inception of the Global Innovation Index in 2007, India entered the top 50 innovating countries for the first time in 2020.15 Its ranking improved from 81 in 2015 to 48 in 2020. The Global Innovation Index provides detailed metrics about the innovation performance of 131 economies around the world.16 It assesses political, regulatory, and business environment, education, infrastructure, and market and business sophistication. Sophistication refers to how conducive market/firms are to innovation. For instance, business sophistication includes indicators such as GERD performed and financed by business, knowledge-intensive employment, and research collaboration between industry and universities.

▪ India has performed above expectation on innovation with respect to its level of development.15 However, India seems to be underperforming in innovation with respect to the size of its GDP. India lags behind most other large economies (top 10) on most indicators of innovation.15 India is currently the fifth-largest economy in terms of GDP.

▪ India must focus on improving its performance on: (i) institutions (political, regulatory, and business environment), and (ii) business sophistication.15


- 148 -

The Economic Survey (2017-18) also noted that more

than one lakh people with PhDs, who were born in

India, live and work outside India.13 In USA alone,

the number of immigrant scientists and engineers

from India increased from five lakh in 2003 to 9.5

lakh in 2013.13 It noted that government programs

such as Ramanujan Fellowship Scheme, INSPIRE

Faculty Scheme, and Ramalingaswami Re-Entry Fellowships provide opportunities to Indian

researchers residing in foreign countries to work in

Indian universities. However, the number of people

returning has been modest (243 during 2007-12 and

649 during 2012-17).13 The Survey recommended

enhancing the scope of these schemes to also provide

additional support for good research instead of just

financial incentive. The additional support should

include: (i) laboratory resources, and (ii) ability to

hire post-docs.13

Resident share in patent applications needs to

increase

The Economic Survey (2017-18) had observed that

patents reflect a country’s standing in technology.13

During the 2007-18 period, the patent applications

filed in India grew at a CAGR of 3%.12 As can be

seen in Figure 15, a larger number of patent

applications in India are filed by non-residents (64%

in 2019) as compared to countries such as China

(11%) and USA (54%).15 However, the share of

residents in patent applications has been steadily

increasing (Figure 16).8 The Economic Survey

(2020-21) had observed that resident share in the patent applications needs to rise further for India to

become an innovation nation.15

Figure 15: Percentage of patent applications filed

by non-residents in the top 10 economies (2019)

Source: Economic Survey 2020-21; PRS.

Figure 16: Percentage of patent applications filed

in India by residents



Foreign Direct Investment in R&D remains low

The Office of the Principal Scientific Advisor noted that Foreign Direct Investment (FDI) is one of the key

factors for enhancing R&D exports.19 India’s share in

global R&D exports was about 2.8% in 2019.19 R&D

exports include: (i) licensing of intellectual property,

(ii) technology embodied in exported intermediate

goods, (iii) technology transfer through FDI, and (iv)

outflow of technical services. India has a trade

surplus in R&D services.19 During 2011-20, India’s

R&D exports grew at a CAGR of 26.6%, the highest

growth among the top 10 exporting countries in

R&D.19 However, R&D accounts for only a tiny

share of FDI inflows into India (0.25% in 2018-19).20

Further, it is mostly concentrated in four sectors -

Information and Communication Technology, Natural

Sciences and Engineering, Pharmaceuticals, and

Clinical Research (more than 80%).20 The Economic

Advisory Council to the Prime Minister suggested a

goal of increasing yearly FDI inflow into R&D to USD 300 million by 2022.21 However, FDI in R&D

has been on a decline since 2015-16 (Table 5).20

Table 5: FDI equity inflow (in USD million) Year R&D Total % Share

2015-16 235 40,001 0.59%

2016-17 84 43,478 0.19%

2017-18 107 44,857 0.24%

2018-19 110 44,366 0.25%

2019-20 67 49,977 0.13% Source: Note titled “FDI into R&D: Current Status and Way

Forward” by the Office of the Principal Scientific Advisor; PRS.

Adoption of technologies developed by public-

funded research organisations is low

NITI Aayog (2018) had observed that the rate of

transfer of technology developed by public-funded

institutions such as the Council of Scientific and

Industrial Research (CSIR) is relatively low.9 It

highlighted poor marketing skills and information

dissemination as key reasons for this.9 It suggested the following measures to enhance technology

commercialisation by public-funded institutions:

▪ Value addition centres may be set up in these

institutions for: (i) upscaling technologies and

improving technology readiness level, (ii)

coordinating with investors to incubate

entrepreneurs, (ii) enabling commercialisation

and marketing, and (iii) providing technology

support during production.

▪ A National Technology Data Bank should be

created by the Department of Science and

Technology which will act as the central database

for technologies that are ready for deployment or

under development.

▪ Public funded research institutions should focus

on the development and deployment of socially

relevant technologies in areas such as clean drinking water, sanitation, energy, healthcare,

9% 11% 11%20%

31% 37%

54%64%

78%88%

0%

20%

40%

60%

80%

100%

Italy

Chi

na

Fra

nce

Japa

n

Ger

ma

ny UK

US

A

Ind

ia

Bra

zil

Can

ada

18% 18% 17% 17%21% 21% 21% 23% 25% 28% 28% 29%

32%

0%

10%

20%

30%

40%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18


- 149 -

and organic farming. These technologies have a

large potential for commercialisation.

Tax incentives for R&D to the private sector have

been reduced

India used to allow a weighted tax deduction of 200%

of expenditure towards in-house research and

development to corporations.15 This was reduced to

150% from April 2018.15 This is going to be reduced

further to 100% from April 2021.15 The Standing

Committee on Science and Technology (2020) was

informed that withdrawal of tax incentive on R&D as

well as exemptions on funds spent in acquiring

patents by the private sector, has negatively affected

the R&D investment in the private sector.5 The Committee observed that the tax incentive had

stimulated R&D spending by the private sector. It

recommended that the Department of Science and

Technology should conduct an impact assessment in

this regard.5

Public procurement does not encourage new and

innovative technologies

NITI Aayog (2018) had observed that public

procurement is biased in favour of experienced and

established products and technologies.9 This

discourages new and innovative technologies offered

1 Demand No 88, Department of Science and Technology, Union

Budget 2021-22, https://www.indiabudget.gov.in/doc/eb/sbe88.pdf. 2 Demand No 89, Department of Biotechnology, Union Budget

2021-22, https://www.indiabudget.gov.in/doc/eb/sbe89.pdf. 3 Demand No 90, Department of Scientific and Industrial Research,


https://www.indiabudget.gov.in/doc/eb/sbe89.pdf. 4 Report No 328: Demand for Grants (2020-2021) of the

Department of Scientific and Industrial Research, Departmentally

Related Parliamentary Standing Committee on Science and

Technology, Environment, Forests, and Climate Change, March 6,

2020,

https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/Re

portFile/19/126/329_2020_12_15.pdf. 5 Report No 329: Demand for Grants (2020-2021) of the

Department of Science and Technology, Departmentally Related

Parliamentary Standing Committee on Science and Technology,

Environment, Forests, and Climate Change, March 6, 2020,

https://rajyasabha.nic.in/rsnew/Committee_site/Committee_File/Re

portFile/19/126/329_2020_12_15.pdf. 6 Medium-term Expenditure Framework Statement laid before

parliament, August 2018,

https://dea.gov.in/sites/default/files/MTEF%20Statement%20%28e

nglish%29%202018.pdf. 7 The Science, Technology, and Innovation Policy 2013, Ministry

of Science and Technology,

http://dst.gov.in/sites/default/files/STI%20Policy%202013-

English.pdf. 8 S&T Indicators Tables, 2019-20, Research and Development

Statistics 2019-20, Department of Science and Technology, March

2020, https://dst.gov.in/document/reports/st-indicators-tables-2019-

20. 9 “Strategy for New India @75”, NITI Aayog, November 2018,

https://niti.gov.in/writereaddata/files/Strategy_for_New_India.pdf. 10 Draft 5th Science, Technology, and Innovation Policy,

Department of Science & Technology, December 2020,

https://dst.gov.in/sites/default/files/STIP_Doc_1.4_Dec2020.pdf.

by startups.9 It recommended that:

▪ international competitive bidding should be resorted to only when Indian manufacturers are

unable to supply products or services of

comparable international quality;

▪ to adopt innovative technologies, experts or

scientific practitioners should be mandatorily

included on committees related to public

procurement; and

▪ Indian startups should be given preference in the

technical evaluation for public procurement.

Following incentives are available to startups

recognised by the Department for Promotion of

Industry and Internal Trade: (i) relaxation in prior

turnover and prior experience requirements, subject to

meeting of quality and technical specifications

(notified in March 2016), (ii) relaxation in bid

security deposit requirements (notified in July

2017).22,23,24 Startups can also get the opportunity to

work on trial orders with the government.22 The recognised startups are allowed to offer their products

and services for procurement on government’s e-

marketplace platform.25 This is aimed at helping

startups to introduce unique innovations to

government and public sector unit buyers.25

11 G.S.R. 776 (E), Ministry of Corporate Affairs, October 11, 2019,

http://egazette.nic.in/WriteReadData/2019/213151.pdf. 12 “Research and development expenditure (% of GDP)”, Data

Bank, World Bank, as accessed on February 10, 2021,

https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS. 13 Chapter 8: Transforming Science and Technology in India,

Volume I, Economic Survey 2017-18,

https://www.thehinducentre.com/resources/article10057766.ece. 14 “Researchers in R&D (per million people)”, Data Bank, World

Bank, as accessed on February 10, 2021,

https://data.worldbank.org/indicator/SP.POP.SCIE.RD.P6. 15 Chapter 8: Innovation: Trending Up but needs thrust, especially

from the Private Sector, Volume I, Economic Survey 2020-21,

https://www.indiabudget.gov.in/economicsurvey/doc/vol1chapter/e

chap08_vol1.pdf. 16 The Global Innovation Index (GII) Conceptual Framework,

World Intellectual Property Organization,

https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017-

annex1.pdf. 17 National Education Policy 2020, Ministry of Human Resource

Development,

https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Fi

nal_English_0.pdf. 18 “National Monitoring : Gross enrolment ratio by level of

education”, Website of UNSECO Institute for Statistics as accessed

on February 11, 2021, http://data.uis.unesco.org/. 19 Note on R&D Exports, Office of the Principal Scientific Advisor

to the Government of India, December 10, 2020,

https://www.psa.gov.in/psa-

prod/publication/R%26D%20Exports.pdf. 20 Note on FDI into R&D, Office of the Principal Scientific

Advisor to the Government of India, November 10, 2020,

https://www.psa.gov.in/psa-

prod/publication/FDI%20in%20R%26D.pdf. 21 “R&D Expenditure Ecosystem: Current Status and Way

Forward”, Economic Advisory Council to the Prime Minister of








https://dea.gov.in/sites/default/files/MTEF%20Statement%20%28english%29%202018.pdf

https://dea.gov.in/sites/default/files/MTEF%20Statement%20%28english%29%202018.pdf

http://dst.gov.in/sites/default/files/STI%20Policy%202013-English.pdf

http://dst.gov.in/sites/default/files/STI%20Policy%202013-English.pdf

https://dst.gov.in/document/reports/st-indicators-tables-2019-20

https://dst.gov.in/document/reports/st-indicators-tables-2019-20


https://dst.gov.in/sites/default/files/STIP_Doc_1.4_Dec2020.pdf

http://egazette.nic.in/WriteReadData/2019/213151.pdf

https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS

https://www.thehinducentre.com/resources/article10057766.ece

https://data.worldbank.org/indicator/SP.POP.SCIE.RD.P6



https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017-annex1.pdf

https://www.wipo.int/edocs/pubdocs/en/wipo_pub_gii_2017-annex1.pdf



http://data.uis.unesco.org/

https://www.psa.gov.in/psa-prod/publication/R%26D%20Exports.pdf

https://www.psa.gov.in/psa-prod/publication/R%26D%20Exports.pdf

https://www.psa.gov.in/psa-prod/publication/FDI%20in%20R%26D.pdf

https://www.psa.gov.in/psa-prod/publication/FDI%20in%20R%26D.pdf


- 150 -

India, July 2019, https://www.psa.gov.in/psa-prod/publication/RD-

book-for-WEB.pdf. 22 “Procurement by Government”, Website of Startup India as


https://www.startupindia.gov.in/content/sih/en/public_procurement

.html. 23 Policy Circular No 1(2)(1)/2016-MA, Ministry of Micro, Small,

and Medium Enterprises, March 2016,

https://www.startupindia.gov.in/content/dam/invest-

india/Templates/public/notification/Relaxed_Norms_of_Public_Pr

ocurement_for_Startups/1.%20Relaxed_Norms_of_Public_Procure

ment_for_Startups.pdf. 24 No.F.20/2/2014-PPD(Pt.), Department of Expenditure, Ministry

of Finance, July 25, 2017,

https://www.startupindia.gov.in/content/dam/invest-

india/Templates/public/notification/Relaxed_Norms_of_Public_Pr

ocurement_for_Startups/2.%20Notification_EMDExemption.pdf. 25 “Easing Public Procurement”, Website of Startup India as


https://www.startupindia.gov.in/content/sih/en/compendium_of_go

od_practices/easing_public_procurement.html.

https://www.psa.gov.in/psa-prod/publication/RD-book-for-WEB.pdf

https://www.psa.gov.in/psa-prod/publication/RD-book-for-WEB.pdf

https://www.startupindia.gov.in/content/sih/en/public_procurement.html

https://www.startupindia.gov.in/content/sih/en/public_procurement.html

https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/notification/Relaxed_Norms_of_Public_Procurement_for_Startups/1.%20Relaxed_Norms_of_Public_Procurement_for_Startups.pdf




https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/notification/Relaxed_Norms_of_Public_Procurement_for_Startups/2.%20Notification_EMDExemption.pdf



https://www.startupindia.gov.in/content/sih/en/compendium_of_good_practices/easing_public_procurement.html

https://www.startupindia.gov.in/content/sih/en/compendium_of_good_practices/easing_public_procurement.html


- 151 -

Annexure

Table 6 and 7 provide details on the achievements of the Department of Science and Technology and the

Department of Biotechnology on key performance indicators as per their respective dashboards.

Table 6: Key Statistics-Department of Science and Technology

Indicator 2018-19 2019-20 2020-21 (up to Dec 31, 2020)

Human Capacity Building

Fellowships provided 1,16,854 92,869 1,030

Number of people trained 20,381 2,805 61,390

Number of conferences 640 389 463

Research and Development

New R&D Projects 3,658 691 545

Ongoing Projects 7,982 10,479 2,946

Institutional Capacity Building

New R&D Infra 251 102 156

Innovation and Startups

Number of Innovations 468 658 617

Startups 898 791 610

International Cooperation

International Collaborative Visits 3,302 774 1

Ongoing Projects 478 2,931 1,829

Fellowships 66 144 37

Number of Manpower Trained 1,221 569 99

Science and Engineering Research Board

Number of Ongoing Projects 6,033 26,664 22,283

Number of New R&D Projects 2,492 2,076 1,189

Human Resource Development 2,912 2,049 464

Development Activities 2,212 1,868 0

Autonomous Institutions

Number of Publications 2,336 2,624 2,453

Number of PhDs Produced 221 296 150

Number of Manpower Trained 1,896 5,452 2,747

Number of Patents Granted 38 98 91

Source: Dashboard of the Department of Science and Technology as accessed on February 14, 2021; PRS.

Table 7: Key Statistics-Department of Biotechnology

Indicator 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21*

Ongoing Projects 2,212 1,955 1,893 2,165 2,460 2,405 2,004

Projects Sanctioned 656 415 552 831 847 594 227

Ongoing International Collaborative Projects 42 66 79 101 139 96 69

Scientists Supported (PI/CoPI) 4,801 4,493 4,569 5,121 5,553 4,521 2,364

Research Personnel (JRF+SRF+RA) 5,766 6,076 6,180 6,195 6,221 6,312 -

CTEP-Proposals Sanctioned

Conferences - - 161 92 83 96 -

Travels - - 522 421 314 317 -

Exhibitions - - 9 8 9 17 -

Popular Lectures - - 6 13 10 28 -

Technologies Generated 117 90 136 75 82 119 -

Publications 2,482 2,494 2,654 1,904 3,478 3,758 -

Patents Filed 186 160 181 102 93 76 - Note: *as of February 14, 2021. PI: Principal Investigator; CoPI: Co-Principal Investigator; JRF: Junior Research Fellowship; SRF: Senior

Research Fellow; RA: Research Assistant. CTEP: Conference, Travel, Exhibition, and Popular Lectures.

Source: Dashboard of the Department of Biotechnology as accessed on February 14, 2021; PRS

- 152 -

Demand for Grants: Environment,

Forests and Climate Change The Ministry of Environment, Forests and Climate

Change is responsible for the planning, promotion,

co-ordination of, and overseeing the

implementation of India’s environmental and

forestry policies and programmes. This note

presents the budgetary allocations to the Ministry

for 2021-22, and analyses various issues related to

the sector.


In 2021-22, the Ministry of Environment, Forests

and Climate Change has been allocated Rs 2,870

crore, which is an annual increase of 6% over the

actual expenditure in 2019-20. The allocation to

the Ministry is 0.1% of the estimated expenditure

of the union government for 2021-22.

Table 1: Budgetary allocation to the Ministry


Actuals 19-20

BE 20-21

RE 20-21

BE 21-22


BE 21-22)

Total 2,538 3,100 2,015 2,870 6%

Note: BE is budget estimate and RE is revised estimate.

Sources: Demands for Grants 2021-22; PRS.

In 2021- 22, 27% of the Ministry’s allocation (Rs

766 crore) is estimated to be on centrally sponsored

schemes on environment, forests and wildlife such

as National Mission for Green India and Integrated

Development of Wildlife Habitats. 16% of the

allocation of the Ministry is towards pollution

control and about 5% is towards environment

protection, management, and sustainable

development. Establishment expenditure, i.e.,

spending on the secretariat and offices accounts for

22% of the total expenditure.

Table 2 represents the budgetary allocation for

major heads under the Ministry.


Ministry (in Rs crore)

Heads 2019-20 Actuals

2020-21 RE

2021-22 BE


BE 2021-22)

Environment, Forestry and Wildlife

768 556 766 -0.2%

Establishment Expenditure of the Centre

521 477 634 10%

Control of Pollution 409 284 470 7%

Autonomous Bodies 326 340 289 -3%

National Coastal Mission 91 68 200 48%

Statutory and Regulatory Bodies

135 108 161 9%

Environment Protection, Management and Sustainable Development

118 108 136 7%

Decision support System for Environmental Awareness, Policy, Planning and Outcome Evaluation

109 84 117 4%

Environmental Knowledge and Capacity Building (such as Eco-Task Force)

86 40 70 -10%

Total 2,538 2,015 2,870 6% Note: BE is budget estimate and RE is revised estimate;

Establishment Expenditure of the Centre includes Secretariat

and subordinate offices; Autonomous Bodies include Indian

Council of Forestry Research and Education, and Indian

Institute of Forest Management; Environment Protection,

Management and Sustainable Development includes Climate

Change Action Plan, National Adaptation Fund, and National

Mission on Himalayan Studies; Decision support System for

Environmental Awareness, Policy, Planning, and Outcome

Evaluation include environmental education, awareness and

training, and environment information systems.

Sources: Demands for Grants 2021-22; PRS.

Overview of the financial allocation

Figure 1 shows the trend of expenditure of the

Ministry between 2010-11 and 2021-22. The expenditure of the Ministry has seen an annual

average growth of 2% during this period.


Key highlights in the budget regarding environment include:

▪ Rs 2,217 crore will be allocated for 42 urban centres with population more than one million for tackling the problem of air pollution.

▪ A voluntary scrapping policy will be introduced to phase out old and unfit vehicles. Vehicles will undergo a fitness test after: (i) 20 years (personal vehicles), and (ii) 15 years (commercial vehicles). This seeks to encourage environment friendly vehicles and fuel efficiency and reduce vehicular pollution and expense on oil import.

▪ Urban Swacch Bharat Mission 2.0 will be implemented with a capital outlay of Rs 1.4 lakh crores over five years (2021-26). The objectives of the Mission include: (i) complete faecal sludge management, (ii) reduction in single use plastic, (iii) source segregation of garbage, and (iv) reduction in air pollution.

Demand for Grants 2021-22: Environment, Forests and Climate Change PRS Legislative Research

- 153 -

Figure 1: Expenditure between 2010-11 and


Note: Values for 2020-21 and 2021-22 are Revised

Estimates and Budget Estimates respectively.


Table 3 shows the utilisation trend of the funds

allocated to the Ministry between 2010-11 and

2020-21.

Table 3: Trend of fund utilisation by the

Ministry (in Rs crore)

Year BE Actuals Over/Under

Utilisation

2010-11 2,351 2,372 1%

2011-12 2,492 1,982 -20%

2012-13 2,629 1,753 -33%

2013-14 2,630 1,890 -28%

2014-15 2,256 1,599 -29%

2015-16 1,682 1,521 -10%

2016-17 2,250 2,278 1%

2017-18 2,675 2,627 -2%

2018-19 2,675 2,586 -3%

2019-20 2,955 2,538 -14%

2020-21 3,100 2,015* -35% Note: BE – Budget Estimate; *Revised Estimate; (+) indicates

over-utilisation; (-) indicates under-utilisation.


Between 2010-11 and 2020-21, on average the

actual expenditure of the Ministry has been less

than the budget estimates for the year. However,

the Standing Committee on Science and

Technology, Environment, Forests, and Climate

Change (2020) stated that the utilisation of funds

by the Ministry in 2017-18 and 2018-19 is

satisfactory.2

In 2020-21, the Ministry was allocated Rs 3,100

crore, which decreased by Rs 1,085 crore (35%) at

the revised estimates stage. This includes reduction

in funds towards: (i) Environment, Forestry and

Wildlife (reduced by Rs 370 crore), (ii)

Establishment Expenditure of the Centre (reduced

by Rs 194 crore), and (iii) Control of Pollution

(reduced by Rs 176 crore), among others. This

may be due to the impact of the COVID-19

pandemic, and a change in spending priorities of

the government over the year.

Key issues for consideration

Some of the key issues in the environment sector

include: (i) global warming, (ii) air pollution, and

(iii) declining forest cover.2,3,4 In this section, we

discuss some of these issues.

Climate Change

Climate change refers to a change of climate which

is attributed directly or indirectly to human activity

that alters the composition of the global

atmosphere.5 Studies indicate that the amount of

greenhouse gases including carbon dioxide,

methane, and nitrous oxide in the atmosphere have

increased rapidly over the last few centuries as a

result of human activities.6,7 The increased

concentration of greenhouse gases in the

atmosphere has led to a rise in global temperatures

leading to other changes in global climate, such as

erratic rains, floods, and cyclones.6,7

According to the Intergovernmental Panel on

Climate Change (IPCC), the average global

temperature is estimated to have increased by

0.85°Celsius (°C) between 1880 and 2012.7 At the

end of the 21st century, the increase in global

temperature is likely to exceed 1.5°C as compared

to pre-industrial levels (1850 to 1900).7 This could

lead to a reduction of the snow cover, increase in

heat waves, extreme precipitation, intensification of

tropical cyclones and increase in sea levels.

Current Emission Levels

The total carbon dioxide (CO2) emissions across

the world in 2018 were 33,513 million tonnes.

Table 4 compares India’s CO2 emissions from fuel

combustion to that in other countries.

Table 4: Global comparison of CO2 emissions

(2018)

Country

CO2 emissions from fuel

combustion (million tonnes)

% of world emissions

Per capita emissions

(tonnes CO2)

China 9,571 29% 6.8

US 4,921 15% 15.0

EU 3,151 9% 6.1

India 2,308 7% 1.6

Russia 1,587 5% 1.7

Japan 1,081 3% 8.5 World 33,513 4.4

Note: EU is European Union; US is United States if America.

Sources: CO2 Emissions from Fuel Combustion 2018,

International Energy Agency (2020); PRS.

China was the largest contributor to the world’s

CO2 emissions (29%). On a per capita basis, the

United States had the highest per capita emissions.

India amounts for 7% of the total global CO2

emissions, and is well below the average global

emissions per capita.8

The 15th Finance Commission observed India’s dependence on thermal energy and the consequent

effect on emission levels.9 It noted that about 60%

of the country’s installed capacity is thermal based

(coal based thermal power accounting for the

largest share). Further, it noted that while the share

-40%

-20%

0%

20%

40%

60%

-2,000

-1,000

-

1,000

2,000

3,000

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

2016

-17

2017

-18

2018

-19

2019

-20

2020

-21

2021

-22

,...,..,.;,.

Expenditure (Rs crore)

% change in expenditure


- 154 -

of renewables in total power generation has

increased from 6% in 2014-15 to 10% in 2018-19,

substantial investment is required in renewable

energy.9 It recommended that a comprehensive

energy policy should be framed. It also noted that

the prices of coal, natural gas, and kerosene in

India are below environmentally efficient levels

(which can partly be due to subsidies given for LPG and kerosene to select consumers). It

recommended bringing the prices of these fuels

closer to environmentally efficient levels, while

providing targeted assistance to potentially affected

vulnerable households.9

The projected changes in climate change pose a

major threat for India in particular, given that the

national economy is closely tied to climate

sensitive sectors such as agriculture and forestry.10

The National Action Plan on Climate Change

(NAPCP) was launched in June 2008 to deal with

issues related to climate change.11 The NAPCP has

eight missions: (i) the National Solar Mission, (ii)

the National Mission on Enhanced Energy

Efficiency, (iii) the National Water Mission, (iv)

the National Mission for Green India, (v) National

Mission on Sustainable Habitat, (vi) National

Mission for Sustainable Agriculture, (vii) National

Mission for Sustaining the Himalayan Ecosystem,

and (viii) National Mission on Strategic Knowledge

for Climate Change.

NITI Aayog in its report on Strategy for New India

(2018) recommended that all eight national

missions under the NAPCP should be revised in

light of new scientific information and

technological advances.12 Further, new national

missions on wind energy, waste-to-energy, and

coastal areas should be developed.12 In addition,

NITI Aayog in its report recommended the

following to maintain a clean, green, and healthy

environment:12

▪ Changes to regulatory framework: Stringent

civil penalties should be introduced to

strengthen enforcement of environment-related

Acts. Further, Rules related to waste

management should be revised and strictly

implemented. These include: (i) Plastic Waste

(Management and Handling) Rules, (ii) Bio-

Medical Waste (Management and Handling)

Rules, (iii) E-Waste (Management) Rules, and

(iv) Hazardous and Construction & Demolition

Waste Management Rules.

▪ Funds: National Adaptation Fund for Climate

Change and other global funds for

strengthening resilience against climate change

in sectors such as agriculture, forestry, and

infrastructure should be utilised. Further,

scientific and analytical capacity for climate

change related assessments should be

strengthened.

The Estimates Committee (2018) had reviewed the

implementation of the NAPCP and made specific

recommendations on some of the Missions. These

recommendations include:11

▪ National Mission on Sustainable Habitat:

The Committee observed that the emphasis of

the Mission is limited to urban habitats only

and does not take into account the

requirements of the rural habitats. It

recommended that the Mission introduce a

comprehensive and integrated plan

encompassing the needs of both rural as well

as urban habitats.

▪ National Mission for Sustainable Agriculture: The Committee noted that

although the Mission focuses on different

aspects of agriculture, it does not include

income security of farmers. It observed that

crop insurance schemes and the MSP scheme

have not made farming remunerative. It

recommended the government to consider

these elements of the Mission.

In 2015, the Paris Agreement was adopted by the

Conference of Parties with the consensus of 197

parties to the convention (including India).13 The Paris Agreement aims to reduce greenhouse gas

emissions globally and limit the increase in the

global average temperature to a level between

1.5oC to 2oC above pre-industrial levels.

India’s Nationally Determined Contributions (NDC)

India submitted its Nationally Determined Contributions to the United Nations Framework Convention on Climate Change on October 2, 2015. India’s commitments include achieving the following targets by 2030:

▪ Reducing greenhouse gas emissions per unit of GDP by 33-35% from 2005 levels.

▪ Achieving 40% of installed electric power capacity from non-fuel-based energy sources (such as solar, wind, hydropower) with help of transfer of technology and low-cost international finance.

▪ Increasing forest and tree cover by creating additional carbon storage and absorption capacity for 2.5-3 billion tonnes of carbon dioxide.

▪ Enhancing investments in development programmes in sectors vulnerable to climate change, including agriculture, water resources, health, disaster management, and Himalayan and coastal regions.

▪ Mobilising funds domestically and from developed countries to implement mitigation and adaptation actions.

In December 2020, the Ministry of Environment,

Forest and Climate Change constituted a high-level

inter-ministerial Apex Committee for

Implementation of Paris agreement.14 The

Committee will be the national regulatory authority

for carbon markets in India. Its functions include:

(i) developing policies and programmes to make


- 155 -

India’s domestic climate change compliant to

international obligations, (ii) coordinating

communications of nationally determined

contributions, and (iii) defining responsibilities of

concerned ministries for achieving India’s

nationally determined contribution goals.14

Climate Change Financing

The Economic Survey (2020-21) observed that

India is relying on domestic resources to implement

adaptation and mitigation action for climate

change.15 It noted that the financing considerations

will remain critical as the country had increased its

targets substantially. Preliminary estimates

provided by the NDC indicate that India's climate change actions till 2030 will require financial

resource of USD 2.5 trillion (at 2014-15 prices).15

It recommended a clearer assessment of the

financial requirement for implementing the NDC

for appropriate allocation of resources. Further, the

possible sources for meeting these requirements

should also be devised.15 The Survey noted that

availability of adequate financial resources for

implementing the NDC goals is a major

challenge.15 It recommended that additional

financial resources and technological support to the

developing countries (as was committed by the

developed countries under the Paris Agreement)

should be implemented.15

Environment Impact Assessment and Clearance

Environment Impact Assessment is a planning tool

to integrate environmental concerns into the

developmental process from the initial stage of

planning.16 The Ministry of Environment, Forests

and Climate Change has made Environmental

Clearance (EC) for certain development projects

mandatory such as certain building, construction,

and area development projects.16

The Comptroller and Auditor General of India

(CAG) (2016) noted certain issues with the

environmental clearance process. Its observations

and recommendations include:16

▪ Delay in process: The CAG noted a delay in the process of EC (including grant of Terms of

Reference, public consultation, and grant of

EC by the Ministry). For example, (i) out of

216 projects examined, the Terms of Reference

was granted within the prescribed time limit

(60 days) to only 14% of the projects, and (ii)

the EC was granted within the prescribed time

limit (105 days) in only 11% of the cases. It

recommended the Ministry to increase

transparency in the grant of EC, streamline the

processes, and adhere to the timelines given

under the EIA Notification.

Draft Environment Impact Assessment Notification, 2020

The Draft Notification seeks to replace the EIA Notification, 2006. It proposes certain conditions and thresholds on undertaking new infrastructure projects, and on expansion or modernisation of existing infrastructure projects. These projects include dams, mines, airports, and highways. The draft notification was released by the Ministry of Environment, Forest and Climate Change in March, 2020.17 Initially, the Ministry invited comments on the Notification by June 10, 2020, which was later extended to June 30, 2020 in wake of the COVID-19 pandemic.18 Further, Delhi High Court and Karnataka High Court extended the deadline to August 11, 2020 considering limited advertisement of the notification in regional languages.19,20 Currently, the notification has not been issued as the consideration of suggestions is ongoing.21

Key features of the draft EIA notification, 2020 include:

Validity of prior-environment clearance increased: The draft notification proposes to increase the validity of prior environment clearance and prior environment permission for all projects. For example, it seeks to increase the validity for: (i) mining projects from 30 years to 50 years, (ii) river valley projects from 10 years to 15 years, and (iii) all other projects from five years to 10 years.

Exemptions from public consultation: The 2006 notification exempts certain infrastructure projects from conducting public consultation. These include industrial parks and complexes, special economic zones, irrigation projects, and construction projects, among others. The draft notification adds several other projects under the list of projects exempted from public consultation. These include: (i) development projects in border areas, (ii) highways, expressways, (iii) metallurgical industries, and (iv) pesticide industries.22 Further, the draft notification makes certain changes to the public consultation timeline, compared to the 2006 notification.

Table 5: Comparison between public consultation timeline in EIA notification, 2006 and draft EIA notification, 2020

Activity Allotted time as per 2006 notification

Allotted time as per 2020

notification Finalisation of date, time, and venue for public hearing

7 days from date of receipt of application

10 days from date of receipt of application

Advertising the details of public hearing

No mention

5 days from getting consent of the concerned Pollution Board

Minimum notice period to public for submitting responses

30 days 20 days

Sending public hearing proceedings to the regulatory authority

8 days 5 days

Total At least 45 days

Up to 40 days

Source: EIA Notification, 2006; Draft EIA Notification, 2020; PRS.


- 156 -

▪ Cumulative impact studies: The CAG noted

that such studies before preparing the

Environment Impact Assessment reports was

not a mandatory requirement. Due to this, the

impact of a number of projects was not known.

▪ National Regulator: It noted that the Ministry

has not appointed a national level regulator to

carry out an independent, objective, and

transparent appraisal and approval for ECs of

projects and to monitor the implementation of

the conditions laid down under ECs.

▪ Uniformity in terms and conditions: It noted

that there was non-uniformity in the terms and

conditions of the EC for similar kind of projects. It recommended the Ministry to

make conditions of ECs compatible with the

nature and type of project to avoid non-

uniformity for similar projects.

▪ Compliance to Conditions of Environment

Clearance: The CAG noted non-compliance in

the 216 sampled projects (ranging from 4% to

56%), in respect of 13 general Environmental

Clearance conditions. It recommended the

Ministry to grant fresh EC only after verifying

the compliance to the earlier EC conditions. Further, it recommended the Ministry to

mandate certain other conditions for an EC,

including installation of monitoring stations

and frequency of monitoring of various

environment parameters for air, surface water,

ground water, and noise pollution.

Air Pollution

Air pollution is the presence of any air pollutant in

the atmosphere.23 An air pollutant is any solid,

liquid, or gaseous substance in the atmosphere in

such concentration which may be injurious to

human beings, other living creatures, or property.

Among the risk factors of diseases in India, air

pollution ranks the second highest (after

malnutrition), accounting for 10% of the disease

burden, and thus, is one of the leading causes for

premature death and disabilities.24 According to estimates published by the India Disease Burden

Initiative, in 2017, 12.4 lakh deaths, i.e., 12.5% of

the deaths in India, were attributable to air

pollution.25

The Central Pollution Control Board (CPCB)

notified the National Ambient Air Quality

Standards (NAAQS) in 2009.26 The programme

enables CPCB to identify non-attainment cities,

i.e., cities that do not comply with the NAAQS. It

identified 102 non-attainment cities where the

ambient air quality crossed the prescribed standards

continuously during the period 2011-15.27

Figure 2 compares the annual average PM10 levels

in different states during 2013 and 2018. It also

highlights the WHO standards (20 µg/m3) and the

NAAQS (60 µg/m3) for the pollutant. As of 2018,

states with comparatively higher PM10 levels

include: (i) Delhi (225 µg/m3), (ii) Uttar Pradesh

(203 µg/m3), and (iii) Gujarat (199 µg/m3), among

others.

Figure 2: PM10 levels (annual average, in µg/m3)

Note: Data for Andhra Pradesh, Bihar and Telangana for 2014. Sources: CPCB; PRS.

National Clean Air Programme (NCAP): The

Ministry of Environment, Forest and Climate

Change launched the NCAP in January 2019.28 It

receives funding under the budget head Control of

Pollution. The programme sets a national level

target of 20% to 30% reduction of PM2.5 and

PM10 concentration levels by 2024, with 2017 as

base for concentration levels.28 City specific action

plans are to be formulated for the 102 non-

attainment cities identified by CPCB.27 NCAP

aims to: (i) prepare comprehensive mitigation

actions for prevention, control and abatement of air

pollution, and (ii) augment the air quality

monitoring network and strengthen awareness

activities.

Financing for air pollution

In 2021-22, Control of Pollution has been allocated

Rs 470 crore, a 16% annual increase over the actual

expenditure in 2019-20. In 2020-21, the allocation

for Control of Pollution was reduced by 30% (from

0 50 100 150 200 250

Andhra Pradesh

Assam

Bihar

Chhattisgarh

Delhi

Goa

Gujarat

Haryana

Himachal Pradesh

Jammu and Kashmir

Jharkhand

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Meghalaya

Mizoram

Nagaland

Odisha

Punjab

Rajasthan

Tamil Nadu

Telangana

Uttar Pradesh

Uttarakhand

West Bengal

2013 2018

WHO NAAQS


- 157 -

Rs 660 to Rs 460 crore) at the revised estimates

stage.

The Standing Committee on Science and


Change (2020) noted that the NCAP is a

programme of utmost importance in the present-

day context and controlling air pollution must be

given the topmost priority.2 It recommended that

the Ministry must be provided the requisite

allocation as sought by it with respect to Control of

Pollution at the revised stage.2

In the 2020-21 Union Budget Speech, it was

announced that Rs 4,400 crore will be allocated

towards clean air for large cities (population more than one million) through the Ministry of Housing

and Urban Affairs.2 In 2021-22, it was announced

that Rs 2,217 crore will be allocated for 42 urban

centres having population more than one million.3

However, no such allocation has been specified in

this Ministry’s Demand for Grants in either years.



Change (2020) noted that the announced allocation

in the Budget Speech (Rs 4,400 crore) for clean air

for large cities in 2020-21 through the Ministry of Housing and Urban Affairs was higher than the

entire budget allocation for the Ministry of

Environment, Forests, and Climate Change (Rs

3,100 crore) for the year.2

The Ministry of Environment, Forests, and Climate

Change has identified 102 non-attainment cities for

utilising this fund under the NCAP. These are

cities which do not meet NAAQS for a period of

five years.2 The Committee noted that there are 46

cities (with population more than one million),

which may be kept out of the non-attainment

category.2 This will help the Ministry of Environment, Forests, and Climate Change to

reduce the shortfall of funds for the schemes of

pollution control.

The 15th Finance Commission recommended the

Ministry of Housing and Urban Affairs be made the

nodal ministry for grants to cities with population

more than one million to take steps to check air

pollution.9 The Ministry of Environment, Forests

and Climate Change may be given a separate grant

for installation of systems to monitor air quality.9

Air Pollution in NCR

Since the past few years, the National Capital

Region (NCR) continues to see particulate matter

levels reach the severe category at several

locations, especially during the winter season. The

CPCB identified the season as critical due to the

meteorological conditions, i.e., lower mixing height, higher humidity, fall of ambient air

temperature coupled with lower temperature

difference between maximum and minimum, and

low wind speed.29 Further, the burning of crop

residue by farmers in the NCR and adjoining areas

is also one of the key reasons for pollution in the

region.

Supreme Court’s directions for pollution control in NCR

On October 18, 2019, the Environment Pollution (Prevention and Control) Authority (EPCA) (established for the prevention and abatement of environmental pollution in NCR) submitted a report to the Supreme Court on the situation of pollution in NCR and sought urgent directions to improve enforcement of pollution control measures. On November 4 and 6, 2019, the Court gave various directions to the governments of Delhi, Punjab, Haryana, and Uttar Pradesh. Some of these are:30,31

▪ Chief secretaries, district collectors, and police officers of concerned areas of Punjab, Haryana, and Uttar Pradesh must ensure cessation of stubble burning.

▪ No demolition, construction activities and garbage burning should take place in Delhi and NCR region.

▪ Delhi government and concerned municipal corporations should remove open garbage and waste, and ensure no open dumping takes place.

▪ Ensure that coal-based industries are not operating.

▪ Pollution control boards of Punjab, Haryana, and Uttar Pradesh and Delhi government must ensure that polluting activities against norms are stopped.

Ordinance to set up a commission for air quality

management in NCR

The Commission for Air Quality Management in

National Capital Region and Adjoining Areas

Ordinance, 2020 was promulgated in October

2020.32 The Ordinance establishes a Commission

for better co-ordination, research, identification,

and resolution of problems related to air quality in

the NCR and adjoining areas. Adjoining areas

refers to areas in Haryana, Punjab, Rajasthan, and

Uttar Pradesh where any source of pollution may

cause adverse impact on air quality in the NCR.

The key provisions of the Ordinance include:

▪ Functions: Functions of the Commission

include: (i) coordinating actions taken under

the Ordinance by the concerned state

governments (Delhi, Haryana, Punjab,

Rajasthan, and Uttar Pradesh), (ii) planning

and executing plans to prevent and control air

pollution in the region, and (iii) preparing

various action plans such as increasing

plantation and addressing stubble burning.

▪ Penalties: Non-compliance with or violation of the Ordinance, and orders and directions of

the Commission is punishable with

imprisonment of up to five years or fine of up

to one crore rupees or both. All appeals

against the orders of the Commission will be

heard by the National Green Tribunal.


- 158 -

Other measures being implemented by the Ministry

to reduce air pollution include:33

▪ introduction of cleaner/alternate fuels, such as

gaseous fuels (CNG and LPG) and fuels

blended with ethanol;

▪ shifting from BS-IV to BS-VI fuel standards by

April 2020 for the entire country;

▪ promotion of public transport and improvements in roads, and building of more

bridges to ease congestion on roads;

▪ revision of emission standards for industrial

sectors from time to time;

▪ banning of burning of biomass;

▪ deployment of increased number of

mechanised road sweeping machines; and

▪ development of a mechanism for redressal of

public complaints regarding air pollution

issues in Delhi and NCR, among others.

NITI Aayog in its report on Strategy for New India

(2018) noted certain challenges to reduce the

problem of air pollution, including:12 (i) convincing

farmers to discontinue the practice of burning crop

residue by providing alternative methods, (ii) lack

of awareness of the ill effects of pollution, thereby

making it difficult to bring about behavioural

change in people, and (iii) ineffective

implementation of ‘polluters should pay for the

pollution’ principle (costs of pollution be borne by

those who cause it).

It recommended the following:12

▪ Funds: A “Clean Air Impact Fund” should be

created to provide viability gap funding for

long-term projects aimed at reducing air

pollution (such as bio-power or bio-ethanol

projects).

▪ Reward and monitoring at the local level: A

reward scheme for village panchayats with

zero burning may be instituted, and a

mechanism to monitor farm fires should be

devised.

▪ Industry Emissions: Emission and effluent

standards for industries should be revised and effectively implemented. Further, a task force

should be set up to study and implement

measures to control pollution from brick kilns.

Forestry

In India, forests are considered as a part of the

natural and cultural heritage. They provide variety of ecosystem services including: (i) absorption of

greenhouse gases, (ii) prevention of soil erosion,

and (ii) habitat to wildlife. One of the critical

challenges faced by forests in the country is

degradation of forest cover.34

Green India Mission

Green India Mission (erstwhile National Afforestation Programme) was launched in

February 2014. Its objectives includ: (i) increasing

forest cover by up to 5 million hectare and

improving quality of forest cover on additional 5

million hectare of land, (ii) enhancing eco-system

services such as capturing and storing atmospheric

carbon to reduce global warming, and (iii)

increasing forest-based livelihood income of about

3 million households.3

NITI Aayog, in its report on Strategy for New India

(2018), identified increasing the forest cover to

33.3% of the geographical area between 2021-23 as one of the key objectives for a clean, and healthy

environment in India.12 Between 2017 and 2019,

the forest cover across India increased by 0.6% (0.4

million hectares).35 As of 2019, total forest cover

in India accounts for 22% of the total geographical

area (71 million hectare out of 329 million

hectare).36 The states with comparatively higher

forest cover as share of their geographical area

include: (i) Lakshadweep (90%), (ii) Mizoram

(85%), (iii) Andaman and Nicobar Islands (82%),

(iv) Meghalaya (76%), and (v) Manipur (75%),

among others.4

Note that, the 14th Finance Commission assigned

7.5% weightage to “forest cover” in its calculation

of states’ share in the central taxes.37 The 15th

Finance Commission (2020) replaced this by a

weightage of 10% to “forest and ecology”.38 This

was done to reward states for the ecological

services from the forest cover, and to compensate

them for constraints arising from the dense forests

in the state.38

NITI Aayog recommended promoting afforestation

through peoples’ participation and the involvement of the private sector, with priority to restoration of

degraded forests.12 Further, it recommended that

the public land along railway tracks, highways, and

canals should be used for tree plantation.12



Change (2018) had noted that despite the overall

increase in the forest cover in India, some of the

North-Eastern states observed a decline in the

forest cover in 2017.3 These states include

Manipur, Arunachal Pradesh, and Mizoram.3,4

The Standing Committee on Science &

Technology, Environment & Forests on the ‘Status

of Forests in India’ (2019) also expressed concerns

about the decline in the forest cover in the North-

Eastern States, which constitute 65.34% of their

geographical area in comparison to the national

forest cover of 21.54%.34 It recommended that the

concerned state governments and the Ministry of

Environment, Forests and Climate Change must

take all necessary steps to ensure that the decline in


- 159 -

forest cover in these states is stopped at the

earliest.34

In addition, the Committee noted that no action

plan has been prepared by the Ministry for

controlling illegal cutting of trees in forests. It

recommended the Ministry to take cognizance of

the illegal felling of trees in different parts of the

country and prepare an action plan for tackling this

menace, in coordination with state governments.34

Financing afforestation: In 2021-22, the Green

India Mission has been allocated Rs 250 crore (an

annual increase of 14% over the actual expenditure

in 2019-20).

The Standing Committee on Science &

Technology, Environment & Forests on the ‘Status

of Forests in India’ (2019) had noted that the

budget allocation to National Afforestation

Programme has been insufficient. This has affected

the achievement of the annual targeted area of

afforestation during the last few years. The

Committee recommended the Ministry to ensure

adequate allocation to the National Afforestation

Programme to achieve the targets under the

Programme.



Change (2020) noted that the Green India Mission

is an important programme.2 However, there has

been under-utilisation of funds in the Mission. In

2020-21, up to the revised stage, 61% of the funds

allocated to the Mission has been utilised.2

Evaluation: The Standing Committee on Science

& Technology, Environment & Forests on the

‘Status of Forests in India’ (2019) noted that the

mid-term evaluation study on National

Afforestation Programme conducted by the Indian

Council of Forestry Research and Education

(ICFRE) in 2008 had highlighted the successful

implementation of the programme.34 However, the

Committee observed that more than ten years have

1 Budget Speech 2021-22,

https://www.indiabudget.gov.in/doc/Budget_Speech.pdf. 2 Report No. 331, Standing Committee on Science and

Technology, Environment, Forests, and Climate Change, March

6, 2020,


ReportFile/19/126/331_2020_12_16.pdf. 3 Report No. 313, Standing Committee on Science and

Technology, Environment, Forests, and Climate Change, March

13, 2018,


ReportFile/19/103/313_2019_1_14.pdf. 4 Chapter 2 – Forest Cover, India State of Forest Report 2019,

Ministry of Environment, Forests, and Climate Change,

https://fsi.nic.in/isfr19/vol1/cover-page.pdf. 5 Article 1, United Nations Framework Convention on Climate

Change, 1992. 6 IPCC Fourth Assessment Report: Climate Change 2007,

Intergovernmental Panel on Climate Change, 2007,

http://www.ipcc.ch/publications_and_data/ar4/wg1/en/contents.

html.

passed since the previous ICFRE evaluation and

recommended the Ministry to undertake a new

study. This will help in assessing the actual impact

of the Green India Mission on the forest cover and

formulate strategies accordingly.34

The Committee also recommended the Ministry to

take necessary action for determining the

availability of total land for afforestation in the

country. This will help state governments in

formulating strategies for taking up the

afforestation activities at their level.

Compensatory Afforestation Management and

Planning Authority (CAMPA) funds

The CAMPA funds were established under

Compensatory Afforestation Fund Act, 2016 in

August 2016.39 The Act requires an entity,

diverting a forest land towards non-forest purposes

(such as mining), to pay for planting forest over an

equal area of non-forest land or over twice the area

of the degraded forest land. The purposes for

utilisation of the fund include: (i) artificial

plantations, (ii) wildlife and forest protection, and

(iii) forest related infrastructure development.



Change (2020) noted that the CAMPA fund has a

huge corpus of Rs 54,394 crore. The funds have

accumulated due to deforestation. However, the

current guidelines on the utilisation of fund restrict

its utilisation for other schemes with similar

objectives (such as Green India Mission) under the

Ministry.2

The Committee recommended the Ministry to

explore possibilities of utilisation of fund for

schemes with objectives like those defined for

utilisation of CAMPA fund. It specified that

amendment to CAMPA Act and rules should be

also considered for enabling utilisation of the fund

for schemes with similar objectives.2

7 Climate Change 2013: The Physical Science Basis, Fifth

Assessment Report, Intergovernmental Panel on Climate

Change, 2013, http://www.ipcc.ch/pdf/assessment-

report/ar5/wg1/WG1AR5_SPM_FINAL.pdf. 8 CO2 Emissions from Fuel Combustion 2015, International

Energy Agency, 2015,

http://www.iea.org/publications/freepublications/publication/CO

2EmissionsFromFuelCombustionHighlights2015.pdf. 9 The Report of the 15th Finance Commission (2021-26),

Volume III, The Union, October 2020,


Reports/XVFC-Vol%20III-Union.pdf. 10 National Action Plan on Climate Change, Prime Minister’s

Council on Climate Change, June 2008,

http://www.moef.nic.in/sites/default/files/Pg01-52_2.pdf. 11 “Thirtieth Report: Performance of the National Action Plan on

Climate Change”, Estimates Committee, Lok Sabha, December

13, 2018,


pdf.






https://fsi.nic.in/isfr19/vol1/cover-page.pdf

http://www.ipcc.ch/publications_and_data/ar4/wg1/en/contents.html

http://www.ipcc.ch/publications_and_data/ar4/wg1/en/contents.html

http://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_SPM_FINAL.pdf

http://www.ipcc.ch/pdf/assessment-report/ar5/wg1/WG1AR5_SPM_FINAL.pdf

http://www.iea.org/publications/freepublications/publication/CO2EmissionsFromFuelCombustionHighlights2015.pdf

http://www.iea.org/publications/freepublications/publication/CO2EmissionsFromFuelCombustionHighlights2015.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC-Vol%20III-Union.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC-Vol%20III-Union.pdf

http://www.moef.nic.in/sites/default/files/Pg01-52_2.pdf




- 160 -

12 Strategy for New India @ 75, NITI Aayog, November, 2018,

https://niti.gov.in/sites/default/files/2019-

01/Strategy_for_New_India_0.pdf. 13 Paris Agreement, 2015, United Nations Framework

Convention on Climate Change,

http://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf; Paris

Climate Change Conference, United Nations Framework

Convention on Climate Change, November 2015,

http://unfccc.int/meetings/paris_nov_2015/meeting/8926.php. 14 Government constitutes High-level Ministerial Committee for

implementation of Paris Agreement, Press Information Bureau,

Ministry of Environment, Forest and Climate Change,

December 2, 2020. 15 Sustainable Development and 06 Climate Change, Chapter 6,

Economic Survey (2020-21),


r/echap06_vol2.pdf. 16 Report of the Comptroller and Auditor General of India on

Environmental Clearance and Post Clearance Monitoring, 2016,

https://cag.gov.in/uploads/download_audit_report/2016/Union_

Government_Report_39_of_2016_PA.pdf. 17 Draft Environment Impact Assessment Notification, 2020,

March, 2020, Ministry of Environment, Forest and Climate

Change http://moef.gov.in/wp-

content/uploads/2020/03/Draft_EIA2020.pdf. 18 S. O. 1429(E), Ministry of Environment, Forest and Climate

Change, http://moef.gov.in/wp-content/uploads/2020/05/EIA-

2020_extn-of-period.pdf 19 Vikrant Tongad vs Union of India (Ministry of Environment,

Forest and Climate Change), W.P.(C) 3747/2020 & CM Appl.

13426/2020, June 30, 2020. 20 “Karnataka HC restrains Centre from publishing final

notification based on draft EIA”, The New Indian Express,

August 5, 2020,

https://www.newindianexpress.com/states/karnataka/2020/aug/0

5/karnataka-hc-restrains-centre-from-publishing-final-

notification-based-on-draft-eia-2179450.html. 21 Unstarred Question No. 843, Ministry of Environment,

Forests and Climate Change, February 5, 2021, Lok Sabha. 22 S.O. 1533: Environment Impact Assessment Notification,

2006, September 14, 2006, Ministry of Environment and

Forests, http://moef.gov.in/wp-

content/uploads/2018/03/so1533.pdf. 23 Air (Prevention and Control of Pollution) Act, 1981, Ministry

of Environment and Forests. 24 India: Health of the Nation’s States, The India State-Level

Disease Burden Initiative, Indian Council of Medical Research,

Public Health Foundation of India, and Institute for Health

Metrics and Evaluation, November 2017, https://phfi.org/wp-

content/uploads/2018/05/2017-India-State-Level-Disease-

Burden-Initiative-Full-Report.pdf.

25 The impact of air pollution on deaths, disease burden, and life

expectancy across the states of India: The Global Burden of

Disease Study 2017, Lancet Planet Health 2018, December

2018, https://www.thelancet.com/action/showPdf?pii=S2542-

5196%2818%2930261-4. 26 No. B-29016/20/90/PCI-I, Gazette of India, Ministry of

Environment and Forests, November 18, 2009,


05.pdf. 27 Unstarred Question No. 1181, Ministry of Environment,

Forests and Climate Change, June 28, 2019, Lok Sabha. 28 “Government launches National Clean Air Programme

(NCAP)”, Press Information Bureau, Ministry of Environment,

Forests and Climate Change, January 10, 2019. 29 Unstarred Question No. 219, Ministry of Environment,

Forests and Climate Change, February 5, 2018, Rajya Sabha. 30 M.C Mehta vs Union of India and Ors., Supreme Court, Writ

Petition (Civil) No. 13029/1985 of 2019,

http://www.epca.org.in/court_orders/SC-ordee-dated4-11-

19.pdf. 31 M.C Mehta vs Union of India and Ors., Supreme Court, Writ

Petition (Civil) No. 13029/1985 of 2019,

http://www.epca.org.in/court_orders/SC-order-dated6-11-

19.pdf. 32 The Commission for Air Quality Management in National

Capital Region and Adjoining Areas Ordinance, 2020, Ministry

of Law and Justice, October 28, 2020,

http://www.egazette.nic.in/WriteReadData/2020/222804.pdf. 33 Unstarred Question No. 103, Ministry of Environment,

Forests and Climate Change, June 21, 2019, Lok Sabha. 34 Report No. 324 – Status of Forests in India, Standing

Committee on Science and Technology, Environment, Forests,

and Climate Change, February 12, 2019,


ReportFile/19/108/324_2019_9_12.pdf. 35 India State of Forest Report, 2019, Forest Survey of India,

Ministry of Environment, Forests and Climate Change,

December 30, 2019, http://www.fsi.nic.in/forest-report-2019. 36 Chapter 2 – Forest Cover, India State of Forest Report 2019,

Ministry of Environment, Forests, and Climate Change,

https://fsi.nic.in/isfr19/vol1/cover-page.pdf. 37 14th finance commission: Report of 14th Finance

Commission,

https://fincomindia.nic.in/writereaddata/html_en_files/oldcommi

ssion_html/fincom14/others/14thFCReport.pdf. 38 15th finance commission: Volume I – Main Report, 15th

Finance Commission, October 2020,


Reports/XVFC%20VOL%20I%20Main%20Report.pdf. 39 The Compensatory Afforestation Fund Act, 2016,

https://legislative.gov.in/sites/default/files/A2016-38_1.pdf.



http://unfccc.int/resource/docs/2015/cop21/eng/l09r01.pdf

http://unfccc.int/meetings/paris_nov_2015/meeting/8926.php



https://cag.gov.in/uploads/download_audit_report/2016/Union_Government_Report_39_of_2016_PA.pdf

https://cag.gov.in/uploads/download_audit_report/2016/Union_Government_Report_39_of_2016_PA.pdf

http://moef.gov.in/wp-content/uploads/2020/03/Draft_EIA2020.pdf

http://moef.gov.in/wp-content/uploads/2020/03/Draft_EIA2020.pdf

http://moef.gov.in/wp-content/uploads/2020/05/EIA-2020_extn-of-period.pdf

http://moef.gov.in/wp-content/uploads/2020/05/EIA-2020_extn-of-period.pdf

https://www.newindianexpress.com/states/karnataka/2020/aug/05/karnataka-hc-restrains-centre-from-publishing-final-notification-based-on-draft-eia-2179450.html



http://moef.gov.in/wp-content/uploads/2018/03/so1533.pdf

http://moef.gov.in/wp-content/uploads/2018/03/so1533.pdf

https://phfi.org/wp-content/uploads/2018/05/2017-India-State-Level-Disease-Burden-Initiative-Full-Report.pdf



https://www.thelancet.com/action/showPdf?pii=S2542-5196%2818%2930261-4

https://www.thelancet.com/action/showPdf?pii=S2542-5196%2818%2930261-4



http://www.epca.org.in/court_orders/SC-ordee-dated4-11-19.pdf

http://www.epca.org.in/court_orders/SC-ordee-dated4-11-19.pdf

http://www.epca.org.in/court_orders/SC-order-dated6-11-19.pdf

http://www.epca.org.in/court_orders/SC-order-dated6-11-19.pdf




http://www.fsi.nic.in/forest-report-2019

https://fsi.nic.in/isfr19/vol1/cover-page.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/oldcommission_html/fincom14/others/14thFCReport.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/oldcommission_html/fincom14/others/14thFCReport.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC%20VOL%20I%20Main%20Report.pdf

https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC%20VOL%20I%20Main%20Report.pdf

https://legislative.gov.in/sites/default/files/A2016-38_1.pdf

PRS Legislative Research

Institute for Policy Research Studies

3rd Floor, Gandharva Mahavidyalaya,

212, Deen Dayal Upadhyaya Marg,

New Delhi-110002

Tel: (011) 4343-4035, 2323-4801

www.prsindia.org